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Fact File — Britain

UK Government plans to get more People on the property Ladder – January 25th 2005

The Deputy Prime Minister John Prescott announced plans that first time buyers are to be offered homes for £60,000 to get more people on the property ladder. He announced that an estimated 300,000 families in housing association or council property are to be allowed to buy a minimum stake of 50% in their homes.

Also announced in this imitative was that up to 80,000 first time buyers will be helped by the construction of low cost starter homes on public land, including 100 former NHS sites. English Partnership – in charge of regeneration will offer 30% of the houses for a target price of £60,000. Half of these homes will be offered to public sector worker (like police community support officers and nurses) in equity stakes of 10%. The land price is likely to cost an extra £40,000. English Partnerships will retain a 40% stake in the property until the buyer pays off the full cost. It was reported that Mr Prescott said that 1,000 homes would be built under this imitative by 2007.

Mr Prescott is pressing other cabinet ministers to release more surplus land to English Partnerships to built low cost housing. The Ministry of Defence surplus property would be one such example.

Mr Prescott has struck a compromise plan to extend the Conservative Right to buy. Under this, it could initially reduce the social housing stock by 50%. Housing association and council tenants will be offered discounts of up to £16,000 to buy a share in their own property. The objective being that when they leave they will be able to sell their stake at a price agreed by an independent valuer. This would mean that Housing associations and councils will be able to use the sale proceeds to build more property to rent. The proposal will be included in the Labour party’s 2005 election manifesto.

The initiative received a mixed reaction from the housing industry, which welcomed action on tackling the issue, but questioned whether it was economic. 25th January 2005

Meanwhile – It has been reported on the 25th January that the British Government and Bank of England appeared to be set on a collision course over the housing market. British Prime Minister Tony Blair forecast fresh rises in house prices whilst the Bank of England expert Kate Barker said a price fall was a likely outcome. Kate Barker is a member of the Bank’s Monetary Policy Committee.

The Prime Minister unveiled a strategy to boost home ownership and said” as housing prices rise, which they will do, they don’t rise at a level that is so great that people feel that they’re simply loosing the chance to get into the market”.

Ms Barker was making a speech to the Institute of Economic Affairs. It was reported that she said the Bank’s central forecast was for house prices to fall modestly for a period, but warned that prices could experience a significant and prolonged overshooting of their fundamental value.

Last year Ms Barker produced a report for the Treasury that found an annual shortage of 70,000 to 120,000 new homes and that there was an ongoing inadequate supply of new homes. 25th January 2005.

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Student loan burden is deterring first time buyers 27th January 2005

The Northern Rock mortgage bank has reported that the burden of paying off student loans is excluding would be first time buyers from the housing market.

The bank’s chief executive Adam Applegarth believes many first time buyers will continue to find it difficult to get a foot on the property ladder because of their higher education debts, rising house prices and competition for suitable properties from buy-to-let investors. The effect of 5% interest rate rises from the Bank of England since November 2003 has also caused the residential lending market to slow in the second half of 2004.

Mr Applegarth said that tighter monetary policy will mean the home moving market being kept at relatively subdued levels for the next two years.