Despite the effects of the last housing slump still being felt by many, there are concerns that government policies could be creating a new housing ‘bubble’.
The warning comes from the Building Societies Association (BSA), who is concerned that assistance given by the government to homebuyers, particularly via the Help to Buy scheme, could “inadvertently” create a new housing ‘bubble’.
Paul Broadhead, Head of Mortgage Policy at the BSA, said: “We are pleased that the Government shares our commitment to get the housing market moving, but it is vital that there is a clearly defined exit strategy right from the start for the Help to Buy: mortgage guarantee initiative. It cannot become a permanent feature of the market beyond the time when the country is in economic recovery mode.”
Broadhead continued: “Care is needed to prevent the actions taken today inadvertently causing a distorted housing market in three years time – a market where state intervention has artificially hiked prices. There are encouraging noises from builders on sign-up for Help to Buy: equity loan. If this and other schemes do encourage builders to build – increasing supply and improving consumer confidence, it will be a success. If the Government were to add some form of savings tax moratorium that would assist consumers by shortening the time they need to raise a deposit.” (Source: Building Societies Association)
Help for first time buyers
The comments come at the same time as the publication of the BSA’s quarterly ‘Property Tracker’ report, which, amongst other things, looked into the type of assistance first time buyers would like, to help them climb onto the property ladder.
Perhaps surprisingly, a larger number of would-be first time buyers thought reducing the tax they pay on savings interest would benefit them more than government initiatives such as Help to Buy.
The survey also found signs that consumer confidence in the housing market is starting to rise. For the first time in three years, the survey found the majority of people expect house prices to increase over the next year. Conversely, only 9% of people expect house prices to fall over the next 12 months.
However, finding a large enough deposit is still a problem, with 54% of people wishing to buy a home saying it was their “main deterrent”.
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