New Measures to Help the Property Market
With house prices having fallen over 10% in one year the UK government has introduced a package of measures to help stabilise the housing market. Here we look at what this may mean for buyers and sellers.
First to benefit are buyers buying a home under ?175,000. Previously stamp duty was exempt only for properties below ?125,000 and now stamp duty is payable only on properties over ?175,000. Stamp duty is 1% of the purchase price so that's ?1,750 saved on a ?175,000 property and the government estimates that this accounts for half of all property transactions. This measure will be in place for one year.
First time buyers whose households are earning less than ?60,000 will be offered ?free? loans of up to 30% of the property?s value to buy new properties. After five years there will be a fee to pay though more detail on this has yet to be provided. The loans system is called HomeBuy Direct is to be run jointly by the government and property developers. The key concept here is that first time buyers will be able to enter the market and developers will have a market for their new builds and the UK needs more homes.
The third measure benefits existing homeowners who can no longer afford their repayments. Councils and housing associations will be able to pay off the debt and then charge rent at a rate that is affordable. As a result, the homeowner will not have to sell their property. This will mean that not only the homeowner can stay in their house, but also the property will not be repossessed and sold on cheaply, furthering lowering the property market.
The people that will benefit are those that want to buy property between the ?125,000 and ?175,000 benchmark. A buyer may further benefit by persuading a seller to lower their price to ?175,000 and of course, save ?1,750 in stamp duty. For properties on the lower end between ?125,00 and ?175,000 a saving of ?1,750 is more of a bonus rather than a major discount. First time buyers will benefit from the ?free? loan and struggling homeowners can stay and rent their homes instead of risking being repossessed. The benefits should in turn pass down the line ? more first time buyers will start more property chains and enable more people to buy and sell. Less repossessions will keep undervalued properties off the market which will contribute to stabilising house prices.
However, the main problem is still the difficulty in securing a mortgage with a larger deposit ? instead of the 5% figure prior to the credit crunch deposits of 10%, 15% or even 20% are required. Together with the rise in oil, gas and food prices, there is less money to put aside for the deposit and so it takes longer to fill the pot. Furthermore confidence in the economy is gloomy and a recession is still on the cards.
The measures are expected to help a small minority of people and so help the market in a small way but they are not expected to solve the problem.
Ellia Carmel writes for the UK Property Search Engine, Wheres My Property,href="http://www.renovatealerts.com/">Renovate Alerts who find property to renovate and Property Money Maker.
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