Housing got the economy into this mess but it is still the best bet for getting us out of it. It’s in everyone’s interest to see prices rise, so the Con-Lib government is wise to axe Hips immediately – and right to keep mum on stamp duty.
Hips – home improvement packs – are not as evil as the estate agents and Conservatives claim they are. If Labour hadn’t invented them, the Tories might be advocating them now.
Making the seller prepare a preliminary survey and report is more efficient than making a succession of buyers all pay for the same thing, either because each would-be buyer discovers the same fatal faults or all competing parties need the information even though only one can complete a sale.
If the lucky bidder pays for a fuller survey later because he doesn’t trust the Hips’ source, at least that is only one duplication. And if they deter owners “testing the water” on a no-sale, no-fee basis, that will save wasting a lot of buyers’ (and agents’) time.
If Hips were voluntary, sellers in a difficult market would commission one as a marketing aid. But because the were compulsory and made estate agents’ work harder get they got a bad press and the Tories made a manifesto pledge to abolish them. Once they were in office they had to do that immediately: no seller would pay £500 for a Hip that was about to become redundant and every day the government dithered, the supply of homes for sale dried up. Acting immediately was essential.
Permanently abolishing stamp duty for first-time buyers paying under £250,000 was a manifesto promise too, but it has been quietly lost in the coalition agreement. As Labour’s last budget introduced exactly that for tow years, no buyer is losing out, but because the concession could end, the deadline encourages people to buy, which boosts the housing market. So dropping this pledge was another good move.
Is it really in everyone’s interest to see prices rise, you may ask? Existing owners certainly benefit financially. Mortgage banks gain too because fewer borrowers face default – or the collateral with cover the loan if they do. That means stronger banks. Rising prices encourage housebuilders to increase the supply of homes. But would-be buyers have to pay more – however they too gain: they wouldn’t want to purchase an asset falling in value and leaving them in negative equity.
So steadily rising prices are in the national interest. They give confidence to consumers, which makes them spend and revive the economy. It even leaves them less stressed.
That is not to say property is still not overpriced, but it is better the excess is gradually eroded by inflation than disappears in a slump. The Con-Lib stimulation to the market helps everyone: the next problem is how to provide sufficient funding to lenders to keep providing mortgages. If banks and building societies have to pay more to attract savings, mortgage rates will rise.