“The Goverment’s proposals barely scratch the surface of the problem”
The Government’s new scheme expects to help 20,000 households into homeownership each year over the next five years. The scale of the plans, however, seem unambitious.
The CML have estimated that 358,000 first time buyers (FTBs) entered the market in 2004 alone and this was when FTBs made up only 29% of the market. To get FTBs back to the 55% market share attained ten years before in 1994, we would need over 300,000 extra FTBs entering the market every year.
Matthew Wyles, Portman’s Development Director commented: “the proposals seem relatively undeveloped at this stage but the limited scale of the initiative is clear. At the levels proposed, the scheme will barely scratch the surface of the problem”.
The proposals involve the participation in the scheme by lenders and property developers who would act as the homeowners’ equity partners. In principle, this idea has potential but the rules of the scheme must be commercially viable.
Wyles comments ”the Treasury needs to resist the temptation to limit too tightly the terms on which equity partners are required to participate. Developers and lenders will only get involved if they obtain the right return for the risk. If the Treasury get the scheme rules right, competitive forces will deliver success for the initiative and fair value for homeowners.”
