In this week’s Budget, Chancellor Alistair Darling announced that stamp duty of 1% on properties worth between £125,000 and £250,000 would be removed for the next two years for first-time buyers. But is this enough to revitalise the property market?
Probably not. It will encourage some first time buyers on the property ladder in those regions where properties on the first rug of the ladder are over £125,000. However, the greatest impediment to first time buyers is not stamp duty, but the difficulty in securing a reasonable mortgage without a huge deposit. The banks total aversion to any risk whatsoever is not acceptable when it is the tax payer who has funded their recovery. Until the banks lend money at reasonable rates and loan to value ratios, activity will be subdued.
However, at least this is a positive step. This Government’s track record in the property market has been dismal:
HIPS (Home Information Packs) have proved to be pretty useless to the point where they are rarely ever requested or seen by anyone other than the person carrying out the HIP. Solicitors usually carry out the searches again because those in the HIP are outdated (doubling the cost). So the HIP normally stays in a filing cabinet or on hard disk not seen or used by anybody.
Selective Licensing effectively puts another tax on being a Landlord, a bundle of documentation that a landlord who uses a professional management agent has already adhered to and yet needs to pay £400+ to the council to check over? Councils of course have leapt on the opportunity and great swathes of Manchester now reside in Selective Licensing areas creating plenty of jobs in the council which has no benefit to anyone. Yet why has the Government not yet announced the simple provision that all Letting Agents/Estate Agents must be licensed by ARLA/NAEA, thus alleviating most of the difficulties highlighted by the media at a cost of around £0.00?
Housing Benefits. The decision to pay rent to tenants rather than the landlord or managing agents is perhaps one of the most ill thought out decisions. Even those tenants that prefer for the landlord to be paid directly, because they openly admit “they are not great at managing money” have this request refused based on some political correctness. The result? Agents and landlords alike are reticent to take on Housing Benefit tenants. The other decision regarding housing benefit of allowing the tenants to get what is effectively a monetary kick-back for renting a property (for example a property that is up for rent at £495, the tenant is rewarded with a £550 rent allowance, the tenant is allowed to keep £55 per month) without thought to what a tax payer would think of this give-away of their money is another indication the Government is out of touch with public opinion. The reality should be that the landlord is rewarded for taking on the additional risk and wear and tear that comes with a Housing Benefit tenant.
Of course the tsunami that was the Credit Crunch pretty much covered up the damage that the above policies were causing. However, it is worth remembering that these were doing damage to the property market before the credit crunch and will probably slow recovery to some degree.
We hope going forward that Governments and Councils reappraise their approach to bashing landlords with ill thought out legislation and hopefully engage landlords and talk to all parties before rushing out poorly implemented initiatives in future.