Ajay

Member Article

New housing bubble "not inevitable"

A leading North East property expert has defended the government’s much-maligned Help to Buy scheme calling critics “people who won’t go to hospital when they’re sick in case the ambulance crashes”.

Announced during the Budget Help to Buy helps people purchase properties with deposits as low as 5% but has also been criticised by the IMF, outgoing Bank of England Governor Sir Mervyn King and former Chancellor Alistair Darling.

Early results however show the scheme to be exceeding expectations with 4000 new homes sold in the two months since it was announced - despite critics continuing to call the scheme “a moronic policy” and warning it risks sounding the “death knell for the UK property market”.

Figures out this week have also shown output in the construction industry rising for the first time since last October, with house builder Bellway also reporting a boost in sales.

Ajay Jagota of KIS Lettings, who manages properties for 700 landlords from branches in South Shields, Sunderland, North Shields and Welwyn Garden City believes that despite the dangers Help to Buy could yet prove a crucial catalyst to economic recovery.

He said: “Of course Help to Buy runs the risk of fuelling a new housing bubble, especially if demand for homes starts to seriously exceed supply - but if it is properly-implemented and only ever used a short-term measure there’s no reason to believe the sky is about to fall on our heads.

“It is surely beyond question that urgent action is required to get the property market moving – research from Savills this week showed that house sales remain 40% below their 2007 levels. More house sales has historically lead to rising house prices which has in turn lead to rising confidence across the economy, which is exactly what the situation needs.

“Household debt has fallen by almost 20% in the last two years. We don’t want to see a return to the days where it was almost 150% of income but we can clearly bear a short term rise and if people feel confident enough to take on mortgages that is clearly both an instigator and an indicator of recovery.

“It seems to me that Help to Buy’s critics are judging it only on the basis of the most apocalyptic worst-case scenario – they’re like people who won’t go to hospital when they’re sick in case the ambulance crashes. If you won’t do something because of a hypothetical risk, you won’t do anything.

“If you look at the details the government’s financial exposure is minimal, and if lenders behave cautiously – which is there is every reason to presume they will, giving their recent reticence to lend at all – the risks should be minimised, especially if the government manages the situation effectively.

“Let’s face facts - Britain needs new homes. The lack of available mortgage finance is holding back growth. For every £1 spent on construction £3 of economic activity is generated. It’s not rocket science to see that a gamble which tackles all of these problems at the same time is a gamble worth taking.”

This was posted in Bdaily's Members' News section by Ajay Jagota .

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