Of all the daft ideas that emerged from the housing boom – such as the concept of using your own home as your pension fund, or the idea that buying a house with a complete stranger was ever a good idea – the daftest was the notion that “the property market won’t collapse – the Government wouldn’t allow it”.
Well, Gordon Brown and his colleagues certainly aren’t happy about the collapse of the British housing market, but that hasn’t prevented it from grinding to a halt. The latest figures from the Royal Institution of Chartered Surveyors (RICS) show that transactions in Britain are at their lowest since RICS records began 30 years ago. And prices are about 10% below last year’s peak already, according to the Halifax.
This, of course, hasn’t stopped either the Government or the housing industry from trying to come up with ideas to resuscitate the market. The latest wheeze from the Council of Mortgage Lenders (CML), reports The Times, is for the Bank of England to act as a sort of buyer of last resort to prop up the market for mortgage-backed securities. But so far all attempts by central banks across the world to pump liquidity into this market have failed – if the best efforts of the Federal Reserve to save the US housing market have floundered, similar measures here aren’t going to do anything for the British market.
Meanwhile, the Government itself has come up with yet another of its strange, complicated little schemes to ‘help’ first-time buyers. This “rent first, buy later” pilot scheme is being piloted in England. The plan, reports the BBC, is that “households earning £60,000 or less would be able to rent a home at 80% or less of the going rate for two or three years in order to save up for a deposit”. But they would have an option to buy 25% or more of the property at any time.
The Government says it hopes this will help “75,000 first-time-buyer households onto the property ladder”. This is beyond ridiculous. The people this scheme is aimed at presumably already live in rented accommodation. So why would they go to all the hassle of moving into another rented property just on the off chance that they might be able to buy it one day? All this scheme will do, at best, is drive down rents in the area for other landlords – something I’m sure buy-to-letters will be overjoyed about.
The reality is there is only one way to get the housing market moving – and that’s for prices to fall even further. That will depend on potential sellers coming to terms with the fact that their homes are now worth a lot less than they thought, something people are notoriously reluctant to do. But with unemployment now rising fast, more and more unlucky homeowners will find that they have no choice.