ROOF Blog

The Chancellor has said the economy will shrink by the biggest amount in modern times – down 3.5 per cent in 2009 – before recovering slightly to grow by 1.25 per cent in 2010 and 3.5 per cent by 2010. He has extended the stamp duty holiday until the end of the year for houses under £175,000 and provided an extra £80 million for shared equity mortgage schemes. Other moves include increasing the scheme to guarantee mortgage backed securities to boost lending and the allocation of £500 million to kickstart stalled housing projects, while local authorities will get £100 million to build energy efficient homes.

The Chancellor is expected to confirm a £1 billion emergency package to kick start the housing market. The deal would see the Treasury offering to take a share in housing projects where work has stalled either due to falling house prices or a lack of finance, along with providing a fund to reverse the trend in council house building. In addition, Mr Darling is expected to extend the temporary suspension in stamp duty on houses costing up to £175,000 until the end of the year.

The Council of Mortgage Lenders has today called on the government to introduce three simple measures in the Budget to kick start the housing market. CML wants low-cost home ownership schemes to be extended and simplified; stamp duty to be reformed; and the introduction of greater support for homeowners who get into difficulty. It said that it was focusing on a narrow range of measures aimed at encouraging housing market activity and limit repossessions.

A group of Labour MPs has urged Gordon Brown to spend an extra £20 billion to stimulate the economy by boosting the housing market. Progress, an independent group of Labour Party members and trade unionists, has called for a freeze on stamp duty for houses valued under £1 million for the rest of 2009, a cut in capital gains tax from 18 to 10 per cent, an increase of £10 in jobseekers allowance, and to offer a £1,000 tax credit to house buyers.

The collapse of the housing industry, and subsequent fall in stamp duty receipts and capital gains tax on sales of homes, along with an increase in the number of those no longer qualifying for inheritance tax, will result in a £15 billion black hole in public finances, economists have warned. And losses to the Treasury could ‘roll on’ for years as the property market is unlikely to bounce back to 2007 levels in the short term.

The Times has learnt that only 15 houses qualified in the first year of a £15 million project to waive stamp duty on the building of hundreds of zero-carbon homes. Critics of the scheme said it failed because the government’s specifications for a zero-carbon home are not practical and ‘too restrictive’, and have questioned the government’s plans that all new homes should be constructed to a zero-carbon standard by 2016. Opponents have said that it would be cheaper and better to subsidise improvements to the air-tightness of existing buildings, but a Treasury spokesperson said that the stamp duty relief has always expected to be picked up in small numbers in the first few years.

Improvements to mortgage funding can’t come soon enough for the British Bankers’ Association, which released data today showing that mortgage approvals last month fell by more than half from a year earlier - down 52 per cent on October 2007. The number of mortgage approvals for house purchases fell slightly between September and October this year, but it was still the second lowest number of approvals since the data started in 1997 and down two-thirds from its peak in July 2007. Stamp duty revenues have fallen 40 per cent in the last year also.

Figures published by the department for Communities and Local Government show there is enough brownfield land in England to accommodate more than one million homes. Of the land suitable for housing, just over half was currently in use, while the rest is vacant or derelict. The report added that although the amount of brownfield land suitable for housing had decreased by seven per cent since 2002, the ‘estimated housing capacity’ of brownfield land had increased by 19 per cent.

Homeless people are not receiving adequate healthcare because services do not cater to their needs, St Mungo’s have said. It found that 32 per cent of people it works with have alcohol dependency and 63 per cent have drug problems, almost half have a mental illness and 43 per cent a physical illness. Overall, 83 per cent of the homeless people St Mungo’s works with have at least one condition but a third are receiving no medical care at all.

During the past three months the private rented sector has seen an increase of almost 20 per cent in new tenancies, according to a quarterly survey by the Association of Residential Letting Agents. The rise in demand has lead to an increase in rental return, from 4.8 per cent to 4.9 per cent for both houses and flats across the UK. Outside of London, 64 per cent of agents report that tenant demand exceeds the supply of property, while in London this reduces to 41 per cent. The average time a rental property remains empty is for four weeks or less, with the average length of a tenancy at 16.7 months.

Estate agents are selling one property a week, the lowest level since the Royal Institution of Chartered Surveyors (RICS) survey started, 30 years ago. RICS blamed the lack of activity on the mortgage drought which was ‘stifling’ buyers and subsequent speculation over a stamp duty holiday. New buyer enquiries fell slightly, as 28 per cent more surveyors saw a fall than a rise in the number of enquiries, and there has been very little improvement in the house price balance, with 81 per cent of surveyors reported a fall than a rise in house prices.

Meanwhile tighter lending criteria and uncertainty in the market saw loans to first-time buyers continue to decline. During July, according to the Council of Mortgage Lenders, loans were down five per cent from June, and a whopping 48 per cent year on year. The average first-time buyer also needed a larger deposit – 15 per cent in July, up from 13 per cent in June.

Chancellor Alistair Darling who welcomed the nationalisation of Freddie Mac and Fannie Mae in America, is waiting on a report from Sir James Crosby, former chairman of HBOS, before intervening in the housing finance market said a senior government official. He is considering proposals to renew or extend the special liquidity scheme which allowed banks to swap mortgage-backed bonds with Treasury bills that can then be used to raise funds in the markets. Last week the Council of Mortgage Lenders called for an early decision to restore market uncertainty, and yesterday Nationwide repeated the ask. The chancellor is likely to present his decision in the pre-budget report late next month.

The Bank of England has kept interest rates on hold at 5 per cent. It has forecast that inflation will peak at 5 per cent by the end of the year, before falling sharply.

Even as the government was touting its £300 million shared equity scheme yesterday, the Welsh Assembly was questioning the future of HomeBuy’s future. The assembly announced it was suspending the scheme in Wales pending a review of its effectiveness. It said that ‘the decision had been taken because of concern that it is currently not achieving value for money, is not widely available and hasn’t been targeted at those who are most in need of government support’.

Meanwhile, the Times has learnt that homeowners whose properties are worth less than the value of their loans will not be eligible to benefit from the mortgage rescue package. Recent research by Standard & Poor’s show around 70,000 borrowers already owe more than their property is worth, with tens of thousands more at risk, including thousands of customers who took out a Together Northern Rock mortgage of 125 per cent. A spokesperson from Communities and Local Government said that the mortgage rescue package was one ‘of a range of options’ available which those suffering could use, and confirmed that those in negative equity would be ineligible.

Gordon Brown’s plan to help families struggling with rising fuel bills was under pressure in a double blow. One scheme, to make energy companies pay more for pollution permits was dismissed as unworkable. The scheme was to raise £500 million to be used to fund fuel vouchers for vulnerable families faced with big increases in gas and electricity bills. The Times understands that this plan has been scrapped after the EU insisted Britain would not be allowed to increase the number of emission permits it planned to sell.

This has put pressure on the Government to introduce a windfall tax on the energy companies. But the energy companies have warned the government they will pull put of a planned £10 billion investment in renewables and nuclear power if forced into giving up profits. The Government is looking to energy companies to help fund a new home insulation and energy efficiency drive as the best long-term way of protecting those facing fuel poverty.

And so to another house price index. Halifax has recorded an annual fall of 10.9 per cent – its first double digit drop since 1983. The monthly drop between July and August was 1.8 per cent. The figures show that the average price of a home in the UK was the same level as it in February 2006. Chief economist of the Halifax said it welcomed the announcement of the stamp duty holiday that will benefit a significant number of homebuyers. However, market conditions will remain ‘challenging’.

And finally, a couple are putting up their six-bedroom seaside house as a competition prize after two failed traditional sales have fallen through during the past two years. They are aiming to sell 40,000 tickets at £20 each, with a £1 from each ticket going to charity.

The Government announced its £1 billion housing package this morning. It aims to help first-time buyers get on the housing market with a £300 million shared equity scheme, support vulnerable homeowners at risk of repossession with a £100 million mortgage rescue scheme, and support the housebuilding industry with a £400 million boost for social housing providers to builde more homes. The chancellor has also announced that stamp duty will not apply to purchases of residential property of £175,000 or less for the next year, and the Department for Works and Pensions will reform support for people in difficulty over mortgage interest payments by shortening the waiting period to 13 weeks. Housing minister Caroline Flint said the government was doing everything to promote long-term stability and market fairness, and repeated the call on lenders to exhaust all other measures before resorting to repossession.

New rules from the Council of Mortgage Lenders and Royal Institute of Chartered Surveyors have come into force to stop mortgage lenders becoming the victims of over-inflated property valuations. Developers and builders must now reveal through a disclosure of incentives form – a 12-point questionnaire - if they have offered buyers incentives such as cash back, cars or paid-for legal fees. Lenders have been concerned that the growing use of incentives to encourage buyers has duped them into lending more than the house valuation. This has been especially true of new-built city centre flats in cities such as Manchester, Leeds and Nottingham.

The Bank of England, due to set base interest rates on Thursday, has ruled out an extension of its six-month scheme designed to ease strains in the mortgage market. The special liquidity scheme which was established in April for a six-month period allows lenders to exchange mortgage assets for government guarantees, will close in October.

According to a National Association of Estate Agents’ survey half of all sales in some areas are being gazundered, as buyers at the last minute reduce their offer. In many cases sellers are forced to accept the new offer to avoid having to put their homes back on the market. One in five agents said half their sales were affected by the practise. Critics, including the Conservative Party, claim the research shows that the government’s housing information packs, brought in to take some of these worries out of buying and selling a house, had failed to make any impact.

And finally spare a thought for the Queen whose property portfolio has plummeted in value. Buckingham Palace fell £57 million during the past year to be valued at £935 million, while Windsor Castle fared better dropping by only £8 million to £180 million.