With the UK General Election 2015 in two months’ time this year’s budget announcement had the potential to make or break the outcome. In his latest blog, Commercial and Residential Development Specialist Richard Carr examines the affect that Chancellor George Osborne’s budget will have on the property market.
Under the current government the UK property market has steadily risen, in line with the growth that the economy has also experienced.
However, getting on to the property market – especially for the younger generation – is still a tough task.
In an attempt to ease the transition on to the property ladder a new ‘Help-to-Buy ISA’ will be introduced by the government.
Savers to receive £50 from the government
Would-be homeowners can save upto £200 per month towards their first property and if they do so, will receive a £50 bonus by the government. The maximum that any saver can be given is £3,000.
The scheme is the latest in a series of housing incentives introduced by the Conservatives. So far, over 80,000 households have been bought in the UK through the ‘Help to Buy’ scheme, which was introduced over two years ago.
Upon opening one of the new ISA accounts the maximum initial deposit is set at £1,000 and then a further £200 per month. It would take savers around four and a half years to save up £15,000 with the help of the government, which equates to a 10% deposit on the average UK home.
Two birds with one stone
Speaking about the scheme, Chancellor George Osborne said: “It will tackle two of the biggest challenges facing first-time buyers — the low interest rates when you build up your savings, and the high deposits required by the banks.”
The move was supported by Adam Challis of Jones Lang LaSelle, who told the ft.com: “It can only be seen as a positive step, encouraging saving at a time when rates available for building a deposit are very poor. High house price growth means savings still won’t keep up with deposit requirements.”
However, Jan Crosby, head of housing at KPMG, felt the scheme failed to address fundamental issues: “It fails to address the fundamental issue causing the housing crisis, which is lack of stock. While such a handout will make headlines, the only real impact it will have on the housing market will be an inflationary one,” he told the FT.
Don’t vote Labour
Richard Carr believes that the current government’s housing incentives and initiatives have helped improve the property market following its collapse.
In his opinion, the latest ‘Help-to-buy ISA’ scheme will aid the younger generation in getting onto the property ladder.
With both the economy and property market showing growth, Richard feels that a change in government this May would set the country back.