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RICS warns ministers that NewBuy scheme could hurt whole housing market

Friday 1st June 2012
Written by Rosalind Renshaw

The Royal Institution of Chartered Surveyors has delivered a stinging attack on the Government’s NewBuy mortgage scheme, suggesting it could wreck the entire housing market.

In a brand new set of big-hitting housing policies, the RICS also calls for the regulation of letting agents, and the introduction of a single, industry-wide regulation and redress scheme to be set up within three years.

The RICS says that NewBuy, which offers purchasers of new-build property 95% mortgages underwritten by taxpayers and developers, could reduce demand for ‘second-hand’ property and play havoc with lenders’ affordability calculations.

It says: “Without stimulating the second-hand market as well as new-build, chains and overall transaction levels will stagnate.”

The RICS says that the NewBuy scheme may not even help first-time buyers when they come to buy second-hand properties.

The body is to include specific guidance to valuers of new homes, to ensure that they understand the impact of NewBuy and make sure it ‘does not adversely impact the market’.

But while the RICS would prefer to see more local Lend a Hand schemes, where buyers put down deposits of at least 5% and local authorities provide an indemnity of up to 20%, the organisation says the ‘dire state’ of local government finances makes this unlikely.

The RICS is calling on the Government to help local authorities introduce more Lend a Hand schemes.

The RICS is also calling on the Government to amend the Estate Agents Act to bring letting agents within its scope, in terms of the need to have client money protection professional indemnity insurance and redress mechanisms.

The RICS says it will work with other bodies to establish by 2015 a single industry-wide regulation and independent redress scheme for the whole sector.

It also wants to see the Government encourage more investment in the private rented sector, including encouragement of ‘build to rent’ schemes, and for private tenants to be offered longer tenancies.

Elsewhere in its new housing policy, the RICS calls for VAT on all home repair, maintenance and improvement work to be cut to 5%, and for Stamp Duty to be reformed.

The RICS produced its new housing policy after consulting its members and will now lobby the Government.  

Peter Bolton King, RICS global residential director, said: “To deliver real influence in the corridors of power, RICS needs to have clear residential policy. In putting this landmark work together, we met with our members and firms of all sizes from right across the country.

“What came across loud and clear is the desperate need to reform sections of the market and generate growth right across the UK.
 
“We will now take these recommendations to the Government with the aim of helping them to improve the residential property sector for those operating within the industry and the public as a whole.

“Change needs to happen if we are to see an economically viable and professionally driven residential sector, and I stand ready to work with members, government, other industry bodies and consumer organisations to achieve this.”

(15) Comments

Added by IAEA INEA EA INEA NIEA EA AER on 2012-06-07 08:34:32

Bit T managed to post not using those stupid initials, have he finaslly realised how stupid he looks using them????
Added by Try again on 2012-06-06 16:31:45

Slappy - Can you try putting that post in English so it make any sense!?? Had too many beers pre post perhaps?
Added by DB on 2012-06-02 13:04:49

BIG T 100% correct well said
Added by Hawkeye on 2012-06-02 09:59:39

All that the RICS are saying has been said months ago by us proper EA's here in these posts. Too little too lat!

Will we see another U turn by our leaders?
Added by Happy Chappy on 2012-06-01 14:03:45

To the poster below, no hpc, no Jonnie just more of your unrelated drivel instead....i know who i would rather have on here.

Now back to the article, clearly the policy was designed to help the developers sell more homes to people who should not be buying them. SBC...Yes, yet more evidence of pandering to the party doners.

Will it affect second hand sales only by the amount that complete undr the scheme, so Peebee is quite correct about a dozen potential sales of "not new homes" affected so far and hopefully not many more.
Added by Absent with leave on 2012-06-01 13:46:59

Note no HPC drivel as they don't get the subject perhaps?
Or Jonnie who knows everything, of course.
Added by Sibley's B'stard Child on 2012-06-01 13:15:47

PeeBee exactly.

Clearly, Persimmon, Bovis et al are better at lobbying (read: more money for party bungs) than RICS.

Not that they need worry, this will be yet another much marketed flash in the pan to show the govt are doing something for hard-pressed, hard-working families.
Added by PeeBee on 2012-06-01 12:53:16

"The RICS says that NewBuy... underwritten by taxpayers and developers, could reduce demand for ‘second-hand’ property..."

Oh, come on!

New-build homes have not just suddenly sprung into existence, have they? There is and always has been 'competition' between the two markets. Many Agents dabble in L&NH; many more have dedicated personnel and even whole departments for New Homes!

How many potential sales does the RICS expect the NewBuy Scheme to "affect"? According to recent release, less than a dozen completions to date - so hardly decimating the market, is it?

Why do the RICS kick up such a fuss with the comment "Without stimulating the second-hand market as well as new-build, chains and overall transaction levels will stagnate.”

Maybe they should first read what the scheme is about. The first words on the website state: "It is aimed at first-time buyers and those who already own a home who only have funds for a 5-10% deposit on the home they wish to buy in England."

SO - those who have less than the MINIMUM deposit that the vast majority of lenders would even start to consider may be able to buy via the scheme, where they wouldn't otherwise - new OR old.

Many of the sales will be to current owners, who will no doubt Part-Exchange their properties and these will fall into Estate Agent's pipelines, no doubt.

The tens of thousands of builders who put these estates up; the suppliers and the sub-contractors will hopefully have more secure jobs as a result of the sales (although as stated above the figures unfortunately point in another direction...) and would therefore be more likely to buy a property themselves.

But the RICS jump in with both feet - straight into the merde...

Big T - normally I am 100% behind anything you say. But your comment "The government's unseemly continuing support to help only Builders to flog their wares is about as pleasant as them pandering to News International." is, in my opinion, way off the mark - for the reasons stated above, but also that, as per the first sentence I quoted above, this is a JOINT venture. The builders partially underwrite the Scheme; are part exposed to its possible failure - but have taken the risk.

I have said it many times before. If the RICS, NAEA or whoever want to approach their vendors en masse and agree a workable scheme in sufficient numbers, then they should go knocking in the door of Parliament.

Until then - they will sit back; watch the real marketing experts take the meat and complain like Hell that there is nothing left except gristle and bone to chew on.
Added by Why? on 2012-06-01 10:22:57

"Stop sniping at PBK" please tell me why.

If there was one person who HAD an opportunity to unite an industry it was him.
If there is one person who HAD the opportunity to lobby government on behalf of a united industry it was him.
If there was one person who had the opportunity to make something of Propertylive on behalf of a united industry it was him.

On so many level he has let us all down, his resignation after achieving not much to be welcomed back into the elitist fold of RICS is just a bit more than I and many others can stomach and then to be unashamed by such a pompous title that he will use it in public is beyond decorum.
The call for regulation is nothing more than an attempt at securing jobs for the boys and more than a tad Hypocritical.
If RICS want to lead the way towards regulation then do so by example, tighten up on the annual audit process and do something about it when an agent or individual fails to meet the standards set.
Added by Quite Right! on 2012-06-01 09:48:47

At last, RICS would appear to be acting on behalf of the membership, instead of acting like a puppet dancing to Ministers demands (examples - HiPs, Energy Reports, Stamp Duty, Government refusal to regulate the industry etc, just as Ray Evans says) ! Stop sniping at PBK, and support him on this, he is right in what he says even if the representations are 24 years late (remember withdrawal of MIRAS, midnight 31st July 1988 - I do, because the phones died, followed by 10 years of property recession )!
Added by Michael on 2012-06-01 09:41:29

Surely the policy is aimed at helping employment, in this case within the building sector, rather than at stimulating sales of houses (much as I'd like to see the latter)?

I do also agree with Ray though, not at all sure this sort of targeted mortgage meddling will have a clean result.

The sustainable answer to increasing employment and confidence is surely NOT to meddle with new homes mortgages but to make the whole of UK (rather than just London) seem a very attractive place for investors to deposit their money, and for these deposits to support industry far more than housing as seems to happen at present. If industry & employment grows, then house sales & prices will follow.

I have no idea how to achieve this sadly, but am as confident as RICS that helping FTB's to buy only new houses is not a great idea.
Added by TREVOR KENT on 2012-06-01 09:40:22

PBK is, of course, right. The government's unseemly continuing support to help only Builders to flog their wares is about as pleasant as them pandering to News International. They need referring to a BiG T Leveson enquiry without delay.

At the same time the whole of the Cabinet needs to be locked in to a non-selling terraced prop in Barnsley without food and water until they agree that current Stamp Duty rates and slabs have all but brought the housing market to a standstill, and agree to do something about it.

Instead, they'll be swanning about basking in the reflected glory of the Jubilee celebrations, without a care in the world for homeowners facing repossession and/or mounting debts because buyers can't afford the associated acquisition costs.

Have a great weekend fellow practitioners and let us hope Osborne will re-tax pastiesnext Wednesday and backtrack on Stamp Duty. BiG T

Added by @Ray on 2012-06-01 09:20:05

Show some respect!
That is the "Global Residential Director" you are talking about.
Should we clap now Peter or do we wait until you are the Pope?
Added by Ray Evans on 2012-06-01 08:58:04

..."Government’s NewBuy mortgage scheme"

ANY interference by government with the free market usually ends in failure and this will be no exception.

The rest of PBK's RICS call I am not so sure about - smacks of an attempt to become leader of a residential sales/lettings market of which it has become a minority actor. Having said that, who else? Certainly not the NFoPP on its past performance.
Added by Brace yourself! on 2012-06-01 08:06:38

Why do I suspect that Peter Hendry is putting together an essay on this one!

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