Government Measures Fall Short Of Aiding Recovery

The temporary lifting of the stamp duty threshold to £175,000 is unlikely to have a significant impact on the UK housing market according to Savills residential research department.

“The main constraints on the market remain the inaccessibility to competitive mortgage finance, the outlook for the economy and the general deterioration of market confidence. The levels of savings on stamp duty at this end of the market are not sufficient to fundamentally alter the decision to buy or not in current market conditions, particularly given the prospects for further price falls into 2009″, says Lucian Cook director of research for Savills. The real benefit of today’s announcement will be the removal of the uncertainty regarding stamp duty which has been dogging the mid market. While the news will not impact directly on the prime property markets, any positive impact at the lower end of the market will ultimately filter upwards.”

Other measures, such as the ability to obtain a free loan of up to 30% of the purchase price of the property are far more likely to address the fundamentals of the downturn for first time buyers, particularly if they give the lenders the cushion they need to provide competitive lending. A five year period will in many cases take people beyond the prospect of negative equity especially given the falls in prices which have already been seen to date. This will temper concerns over what happens at the end of the period of the government backed loan. However, the extent to which the scheme is available will ultimately determine its success.

The provision of more shared equity housing will undoubtedly play a key part in providing greater accessibility to the home ownership over the medium term especially where households are struggling to accumulate deposits. However if it takes much more than 12 months to feed into the market, ironically it may come at a time when costs of buying are broadly in line with costs of renting, accounting for the prospect of further rental growth and 25% house price falls over the course of 2008 and 2009.

Brian D’arcy Clark, Savills Director comments, “The Government is playing political deckchairs. Any good news is welcome but today’s announcement has nothing to do with either property market nor the economy”.