Shelter has called on the Government to rethink its Help to Buy mortgage indemnity scheme because of its concerns over house price rises and Britain’s continuing boom and bust housing market cycles.
It said that yesterday’s ONS figures showed that house prices in England were already at record levels, surpassing their previous peak in January 2008, with fears that Help to Buy will push prices even higher.
Shelter said that Help to Buy will fail to help those who need it most, because the mortgage repayments will be too high for middle-income families in almost 80% of the country.
Independent research commissioned by Shelter modelled 80 different household types, examining their wages, savings, and house prices in their area to map the chances of them ever being able to buy a home.
The study assessed their chances of home ownership if the current cycles of house price boom and bust continue, comparing them with a scenario where house prices remained stable.
The research showed that rising house prices in the current property market mean that, without significant financial help from their parents, a generation of people currently in their twenties could be left with more than a 50% chance of never owning a home of their own in every single region of the country – not just in London and the south-east.
The study found that the situation would be very different if house prices were stable, when this generation’s chances of owning a home would rise dramatically. People in the south-west could see their chance of home ownership almost double from 38% to 74%, while those in the west midlands could see their chances rise from less than half to almost 80%.
Shelter is calling for an era of stable house prices to give families a better chance of buying a home, putting an end to decades of damaging house price boom and bust.
To stabilise house price inflation, the organisation is calling for a major housebuilding programme as well as a review of Help to Buy. Shelter also wants the Bank of England to act to stabilise the market if house prices start to rise rapidly.
Campbell Robb, chief executive of Shelter, said: “Our rollercoaster housing market may make headlines, but these days rising house prices don’t have the feel-good factor, and for good reason. Nobody wants a return to the bad old days of house prices rising then crashing.
“Unless house prices are stabilised, the grim reality is that – apart from a lucky few able to rely on the Bank of Mum and Dad – soaring prices may well lead to the prospect of home ownership slipping even further away from even more of us.
“From families left with no choice but unstable private renting, to the tragedy of repossession and negative equity, people are paying the price for our broken property market.”
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Comments
For a realistic view of Help to Buy, have a read of this:
http://www.telegraph.co.uk/finance/personalfinance/comment/10372176/Help-to-Buy-and-the-problem-with-income-multiples.html
I'm in an area where the bottom of the market starts at around 6 times the average wage, so as anon posted below,
'Which part of HelpToBuy is helping buyers to buy their own homes?'
@Smallpoint ...
No, you raise an important issue which I am happy to answer.
People successfully selling are increasing the supply of available houses - for buyers. The more people who successfully sell, the more buyers can buy and the turnover of the whole market will increase. This must result in more business opportunities in many directions.
There's no need for a population reduction or a mass emigration as you put it. Price will determine who gets what as it always has.
Price (and the planning system) will ultimately decide how many more houses are built, where and when. It's clear many more are already needed nationally of course.
I wish to refer people to my blog in order to lay out the full explanation of these proposals for detailed consideration.
"It's clear that both estate agents and the housing market as a whole are currently in crisis."
I'm proposing that to sort things out, people need a sort of "Super Agent" to replace traditional estate agents because the latter are currently loosing money as well as potential sales.
A SuperAgent could fill the gap. S'he would do this by negotiating both sales and purchases COMBINED.
Business would be guaranteed, (as long as they could provide a better service than people just trying to do their finding and negotiating themselves).
If they doubt their capabilities on that score, then they shouldn't expect to be able to make themselves a profit anyway.
Any further questions please?
Where do the people who sell go to in order to increase supply?
Unless your latest proposal involves some sort of population reduction or mass emigration, the demand side of the equation remains the same and so does the supply.
I can't be bothered to read more of your 'I reckon' rantings but needless to say they will ignore the fact that everyone needs to live somewhere.
It really is a desperate and pathetic cry for attention if you have to advertise your bloggings
House prices have doubled approximately every 7 years since WWII.
That has a lot to do with restrictive planning policy.
However, the UK population has risen dramatically during the last decade or so and demand for homes in line with that.
To pretend that the present state of affairs, has nothing to do with uncontrolled immigration is plain PC
Which part of HelpToBuy is helping buyers to buy their own homes?
Well said Denise.
and yes right to ignore any post by idiot RR, same broken record, hes like the HPC crew he actually believs he can change things, hence tag idiot.
So, not satisfied with interferring with the letting industry, Shelter is now involving itself with the Government's proposals to help buyers to buy their own homes!
Sorry, have I missed the point here? Aren't they supposed to be a non-political charity focusing on sourcing homes for homeless people ...?! So, how is it wrong if people who have had to rent accommodation over a relatively long time are helped to buy their own homes? I presumed that it was a good thing because it will free up rented accommodation which is currently fairly static so that there will be more rental accommodation available. This should have a positive knock-on effect that can only benefit homeless people I would have thought.
Assuming that ‘demand’ without the ability to pay now exceeds ‘supply’, any availability of extra finance will bolster prices rather than satisfy that demand. (That’s because sellers will each try and get more of the money being made freshly available to buyers.)
The converse, the non-availability of extra finance won’t cause such a distortion. (Obviously.) In this situation prices will, instead, have to adjust to suit current purchasing power. The latter is by far the more effective way to distribute scarce resources.
Put another way it's best to let all markets (other than pure money markets) function on their own – without direct financial intervention.
If any specific non-financial market (e.g. the housing market) needs intervention, some form of intervention which is believed to be appropriate ‘other than’ direct financial intervention might help. For example, devising new ways to increase the supply of available properties.
One way to increase the supply or availability of properties in the short term (e.g. while more are in the process of being built or being made available), is to change the way houses are currently marketed. Instead of using estate agents by instructing them to sell individual houses, get them to use their skill more extensively, by helping those wishing to move to find and secure suitable new (or alternative) accommodation - at appropriate prices to the buyer?
More information about this exciting new proposal may be seen at: http://www.property-match.co.uk/blog/