Kick-start the engine of the economy

The most pressing issue for the country is to kick start the housing market. In times of economic difficulty the property market is the engine which will drive activity back into the market as a whole.

The Barker Review of Housing Supply in 2006/7 concluded the reason house prices were going up so fast was as a result of the massive shortage of homes for people to buy. As a result, the Government called for 20,000 more homes to be built by 2020 and that’s when it all started to unravel and the market started to collapse.

The implications of a deteriorating housing market for the wider economy are grave. The housing market supports not only the house building sector but a whole raft of professionals from financial institutions to removal firms, carpet retailers and fitters, fitted furniture and white good retailers, not to mention the construction sector.

There has to be a stop to the house price reduction and a return to a market where prices are flat or preferably growing at a small percentage rate each year. A small amount of house price inflation is good for the economy, after all if something is going to cost more tomorrow then buy it today. If the reverse is the case, the market stagnates as it is at present.

The government has to recognise the harm the current downturn and rapid reduction in house prices is having on potential first time buyers and homeowners who will have used their home as collateral for debt, be it a mortgage or to support a business loan. Many first time buyers have now been put off buying their first home as a result of this downturn. The results of which have already placed significant pressure on the Private Rental Sector (PRS), as well as social housing provision.

Initiatives
The government need to introduce more initiatives for first time buyers to help them onto the property ladder. An idea would be to provide first time buyers with a ‘gift’ never to be repaid of up to £10,000 or 5 percent, whichever is the less of a property purchase the purchaser to find an equivalent amount. The banks and mortgage companies should provide 90 percent loans on the property and 15 percent of the loan guaranteed by the Government for three years. This will get the housing market going and £1bn will support 100,000 house purchases.

The government must as a priority insist banks and lending institutions lend up to 85 percent on mortgages to landlords for buy to let property, which must be let and available to be let for at least five years.

Even if these facilities were only available for a year before they were withdrawn they would make a huge difference to the economy.

Two things would happen as a result of initiatives such as these. Firstly, the housing market will start to move again and transactions will re-start. The first time buyer market will mop up much of the unsold stock which will stabilise prices. Once confidence gradually returns, the banks and other lenders will be confident of the asset value they are lending against.

Monitoring
Of course these ideas would need control and careful handling to ensure they work. The letting industry, landlords and agents need a licensing regime to ensure a good service is provided so any rogue agents and landlords can be weeded out. The Association of Residential Lettings Agents (ARLA) has a licensing scheme for members who have to meet professional standards tested by examination. Other reputable bodies include the National Approved Letting Scheme (NALS), National Association of Estate Agents (NAEA), National Federation of Property Professionals (NFOPP), and the Royal Institution of Chartered Surveyors (RICS).

The current method of allowing local authorities to license agents and landlords in their areas is not the solution. The government should consult the expert professional organisations such as these which can be done at no cost and will help to get the property market moving again.

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