It has been an interesting time in the property market. Many of us sat watching the Chancellor deliver another budget, hoping that the big news was finally going to be a much rumoured change in Stamp Duty. Perhaps a new 2% rate band or even the holy grail of a complete overhaul to charge the tax like income tax and end the much maligned “slab” effect.
Alas, it was not to be, but the surprise changes in pension legislation were nonetheless to have an effect on the property market, in particular the growing popularity of using property as an alternative to pensions. In fact there are two schools of thought as to what the changes could mean.
On one hand, does the fact that pensions are no longer prescriptive where taking an annuity is concerned mean that many will return to the pension rather than looking at buy-to-let property early on? This would certainly make first time buyers, battling away with cash ready investors, feel more positive.
On the other, as we head towards a generation of baby boomers eyeing retirement, does this freeing up of oodles of cash mean that demand for buy-to-let investment properties as an alternative, or a companion to other investments, is about to shoot through the roof?
This does feel the more likely response. After all, the British obsession with bricks and mortar is well documented, whilst having an investment you can see and touch rather than something that ultimately others control on paper, is very appealing.
Unfortunately, this does nothing to help the growing issue of rising prices and lack of supply of properties, especially in high demand areas like London which continues to widen the gap between the generations in terms of home ownership.
There has been much talk about the “overheating London property market”, with many blaming government schemes that stimulate demand rather than solve the real issue, which is a supply side one.
Looking at the figures on the impact of Help to Buy so far it is pretty clear that, for the moment in any case, this has not been fueling London house prices. With the average property price at around the £200,000 mark, it is no surprise that around 80% of the schemes take up has been concentrated outside of London.
Help To Buy 1, the equity loan, has definitely given house builders more confidence to build more homes and it was no surprise this has been extended. The more controversial second part of the scheme has actually had beneficial effects on the availability of 95 per cent mortgages, with three times as many now available either through the scheme or off the lenders own backs.
The problem is that, whilst there is no evidence as yet, too many schemes that boost demand, rather than supply, does have the potential to blow up a housing bubble.
London has always had a unique property market, with demand for housing from cash rich UK and overseas buyers unwavering. As London continues to prosper this demand is unlikely to abate any time soon.
So regardless of government schemes, the simple fact is that increasing housing supply, that is ultimately affordable, is the crucial factor. The problem is that in recent years, governments of all sides seem to have struggled to provide sufficient plans to do this.