Introduced by George Osborne as a budget for the aspiration nation, this year's budget made provision for an additional £5.6 billion of financial support to tackle the long standing problems in the housing market. We have set out some details of the measures intended to end the stagnation of the UK property market below.
- Help to Buy: This scheme is an extended version of 'First Buy' and is intended to assist those aspiring to own a new build residential property. £3.5 billion has been earmarked by the government to provide equity loans of up to 20% of the value of a property provided the borrower has at least a 5% deposit. The loans will be interest free for the first 5 years then in the sixth year a fee of 1.754% will apply which will increase annually by reference to RPI plus 1%. The loans are repayable at any time over the term of the mortgage or when the property is sold. The loans will be available for properties of up to £600,000 value and the previous income cap restriction on borrowers has been removed opening this up to first time and second time buyers. The scheme will run for 3 years from April 2013.
- Mortgage Guarantee: This scheme will run for 3 years from January 2014 and be available for high street mortgage lenders. The government will offer lenders the option to purchase a mortgage guarantee for a commercial fee on the high loan-to-value element of a mortgage to leverage the risk of default. The guarantee will be for a maximum period of 7 years as the risk of default drops significantly after this period. Qualifying borrowers will be buying a new or existing property up to £600,000 in value; will have a deposit of between 5 and 20%; and will meet the lenders' other criteria. However it will still be at the lenders' discretion whether to take up the guarantee and lend on this basis.
- Right to Buy: The existing right to buy scheme allows qualifying tenants to acquire their council property at a discount. The Budget has extended this by reducing the qualifying period of renting from a social landlord from 5 years to just 3 years (non-consecutive) and by increasing the maximum discount cash cap to £100,000 in London as of 25 March 2013.
- Affordable Homes Guarantee programme: This programme will have its budget doubled to boost house building. A total of £450 million is now assigned to finance construction of 15,000 more affordable homes by 2015.
- Build to Rent: The £200 million Build to Rent Fund was launched in 2012 to encourage developers to build more private rental properties and this fund is now to be increased to £1 billion.
In support of the overall economy and housing development, there will be an increase in capital spending on infrastructure of £3 billion per year from 2015/2016 and reform to the government's approach on infrastructure delivery.
Critics may say the proposals amount to tinkering around the edges rather than effective solutions, especially given that demand for residential property in parts of the UK has been outstripping supply for many years. However, only time will tell if the coalition has done enough this time to resuscitate the residential market in the short term, and if infrastructure investment will be rewarded by economic growth.