UK Government has announced a package of measures to provide assistance to people affected by the current problems in the housing market.

Both the Treasury and Department for Communities and Local Government have announced a package which covers help for people who may have their home repossessed and changes to stamp duty.

The key points of the Government’s proposals are as follows:

Stamp duty land tax will not apply to purchases of residential property of £175,000 or less from 3 September 2008 to 3 September 2009.

RICS view: A one-year stamp duty holiday could provide some much needed relief for first time buyers currently struggling in the current market.

However, 9 out of 10 of total transactions will be unaffected by the band movement.

The move will have little impact in London where the average price a first time buyer pays is around £260,000.

At best the relief will save buyers £1,750, a drop in the ocean of the £27,738 RICS estimates as the average upfront costs of buying a home.

RICS is pleased that the Government has ended the uncertainty over stamp duty but there should be a complete holiday from stamp duty followed by reform of the slab system to a marginal system similar to income tax.

RSLs will be able to support families who risk having their home repossessed by buying the home outright and the owner becoming a tenant or entering into a shared ownership or shared equity arrangement

RICS view: Mortgage rescue schemes are a welcome step to help prevent the trauma of families having their homes repossessed and are likely to be the most effective part of today’s package.

RICS has been calling on the Government to introduce a scheme of this type as we predict repossessions will rise significantly over the next year.

The scheme should help reduce the trauma faced by families threatened with having their home repossessed.

An extension of the HomeBuy direct shared equity scheme which will offer buyers an equity loan of up to 30% of the value, co-funded by the government  and the developer, free of charge for five years.

RICS view: Mortgage providers are still reluctant to lend on shared equity properties so the extension of the HomeBuy scheme will only have a limited impact on the current market.

At best an estimated 10,000 people will be helped by the scheme so the overall effect will be insignificant in a market where over a million transactions occur under normal market conditions.

Bringing forward £400 million for social housing from existing budgets, delivering up to 5,500 more homes over the next 18 months.

RICS view: Bringing forward funding for social housing that has already been allocated for future years may provide a short term boost but could lead to future budget problems.

This could lead to a repeat of the situation in the early 1990s where Housing Associations were given funds to buy properties then suffered in subsequent years when their budgets were restricted.

More serious reforms are needed to the Housing Association business model so it is less adversely affected by changes in the market. 

RICS Response to Overall Package
Action to increase lending by improving liquidity in the mortgage market is essential as part of a coherent package of measures alongside help for first time buyers and protection against repossession.

Without making it easier to get a mortgage, the Government is failing to return the housing market to a sustainable position.

RICS will continue to pursue:

• fundamental reform of the Stamp Duty system
• liquidity measures
• other suggestions put to the Government to tackle the credit crunch.

RICS has already written to Government with its package of policy measures and seeking opportunities to join up Government thinking and action.

RICS has also outlined concerned at the fragmented nature of discussions by Government with the property sector and the lack of consultation with the market on the fundamental problems we face and the solutions that will work and can be delivered.

The package does go some way to addressing the effects of the credit crunch.

Overall RICS is concerned that the Government has not gone far enough to respond to market pressures with their package and their proposed measures will not have sufficient impact on those suffering as a result of the current crisis.

Further information
James Rowlands
E jrowlands@rics.org
Gillian Charlesworth
E gcharlesworth@rics.org .