Government backing for people to buy homes could tie up people’s money in property and slow down the economic recovery, one of the region’s leading housing experts has warned.
Julia Williams, director of Midland property management specialists Premier Places, is urging Chancellor George Osborne to re-think what she has labelled as a “well-intentioned but flawed” budget pledge of taxpayer-funded subsidies to get the housing market moving.
Ms Williams fears that while there will be a boost to the construction industry, the Treasury-led scheme will direct too much of people’s personal finances into buying houses with mortgages they will find difficult to exit – as opposed to more flexible, less pressurised rental agreements.
She said: “There is an obvious short-term shot in the arm for housing developers from the Help to Buy scheme the Chancellor announced earlier this year.
“The big problem though, is that we could see property prices jump, putting up the costs of mortgages and drawing people into debt they cannot afford. If anything, it’s distorting the housing market. It’s a well-intentioned, but flawed policy.
“It is distorted simply because if people are paying more of their income towards a high-cost mortgage, they aren’t spending it elsewhere and that’s going to dent the economic recovery – especially if they are also struggling to withdraw from a high-value mortgage.
“As a country the UK has placed too much emphasis on investing available capital into a mortgage whereas in other European countries – our economic competitors – such as France and Germany, people are more interested in funding their education, careers or business ventures by renting properties.
“Renting allows people to move easily for work and to take on the opportunities for training and career development. Far from being dead money, renting helps us to invest in other things such as growing a business or our children’s education, but support for people to rent has been overlooked by the Government.”
Ms Williams said she wanted to see the Government develop a longer term strategy for growth in the rental sector with the aim of producing knock on benefits for the economy.
She added: “There is little point in just subsidising high property prices. If people were not putting all their capital into their homes they would have the funds available for other personal or business investments, all of which provide the vital capital that can help businesses to borrow, innovate and create jobs.”
Ms Williams added that a recent Government decision to downgrade proposals that would have seen all landlords legally required to check the immigration status of their tenants was a ‘step in the right direction’ as it reduced the amount of red tape and unnecessary administration.
Article provided by www.premierplaces.co.uk