New Dawn for Housing?

Posted on March 16, 2011 by Professor Benfield There have been 0 comments

Desperate Remedies

Desperate conditions call for radical solutions. Now, at last both Central and Local Government seem to be waking up to the horrendous situation they have created for housing across the UK.

Never-Never Land

According to the Financial Times, last week the Coalition let it be known that consideration was being given to allowing house-builders to build on publicly owned land and only have to pay for it once the houses were sold.

Intended to help builders’ cash flow, it seems this is just one potential incentive being considered for Budget announcement.

Land Prices

The main concern about this, as the HBF point out, is that local and national government need to be realistic about what their land is worth.  With the prospect that their direct, or retained, surveyors may advise holding out for an anticipated return to higher prices, this could become a problem.

Return of 95% Mortgages

In the wake of arrangements made with insurance companies and building societies by some of the large national volume house-builders to secure 95% mortgages for their customers, today we hear that some local councils are about to do the same.

By effectively ‘depositing’ money  in escrow with building societies to underwrite up to 20% of the funds required, Councils will enable mortgage lenders to increase their mortgage advances from 75% to 95%.

Hooray for/from House-Builders

If these types of arrangements take hold, we could soon see a return of first time buyers to the market, which will generally allow the whole ‘chain’ of house-buyers and sellers to become freed up.

The danger will be when the banks eventually complete the ‘restructuring’ of their Balance Sheets, are able to satisfy the new capital impositions on them, and decide – or need – to go all out for lending once more.  Let’s hope that we do not get back to 120% loans, sub-prime lending and all that stuff that led to the collapse a few years ago.


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