17th Mar 2014 13:32
LONDON (Alliance News) - UK housebuilders saw their shares jump Monday after Chancellor George Osborne said the first part of the UK government's contentious Help to Buy scheme would be extended by four years to 2020.
The first phase of the Help to Buy scheme in England started in April 2013, making buyers of newly built homes eligible for a 20% equity loan from the government on top of their 5% deposit.
The second phase, which started in the Autumn, guarantees a portion of a buyer's mortgage of new and existing homes and hasn't so far been extended beyond its current end date.
Persimmon PLC was the FTSE 100 top riser, up 4.7% Tuesday morning, while Taylor Wimpey PLC, Crest Nicholson PLC and Barratt Developments PLC all gained on the FTSE 250.
The scheme has been a welcome boost to housebuilders, which have reported an accelerating recovery in the UK housing market through 2013 and into 2014, particularly in London and the Southeast. The builders virtually halted new building in the wake of the financial crisis as banks pulled mortgage financing and the ensuing economic crisis put off house buyers. The companies instead focused on paying down debt.
However, Osborne?s flagship mortgage-financing scheme has not been without controversy, with critics blaming it for making house prices more unaffordable, a view supported by the latest reading of the housing market from estate agency Rightmove.
Figures released overnight by Rightmove PLC, which runs property website rightmove.co.uk, showed that the average asking price for a new property coming onto the market climbed to GBP255,962 in March from GBP251,964 in February, setting a new record. The previous peak was GBP253,658, set in July last year. On a yearly basis, the house price index posted a 6.8% gain during March, which was slightly weaker than the 6.9% rise in the previous month.
Speaking ahead of his Budget statement on Wednesday, Osborne said on the Andrew Marr show on Sunday that an extra GBP6 billion would be put into the scheme, allowing a further 120,000 new homes to be built in England.
The Home Builders Federation welcomed the news and said the scheme has ?reinvigorated the home building industry, contributed to a sharp increase in new housing starts and allowed thousands of First-Time Buyers onto the housing ladder.?
However, Rob Wood, chief UK Economist at Berenberg, said both aspects of the scheme should be ?cancelled immediately?.
?There is a housing shortage and prices are too high. Subsidising demand will not help that. Much more effort should be put into freeing up planning constraints. The is the real block in the market not a lack of demand ? as shown by the huge difference between the value of land with and without planning permission,? he said
Wood said by stimulating the market, the government will provide more impetus to house prices, which he expect to rise 10% this year and next.
Shadow Chancellor Ed Balls also has spoken out against the scheme and advised that it be reviewed.
Speaking ahead of Osborne's announcement, Balls told The Guardian newspaper on Friday that the chancellor should consider cutting the maximum size of a mortgage that qualifies for taxpayer-funded support to GBP400,000 from GBP600,000. He also said regional caps should be introduced to reflect the vastly higher prices in London and the South East.
http://www.theguardian.com/politics/2014/mar/14/cut-help-to-buy-ed-balls-shadow-chancellor-economic-recovery
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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Related Shares:
RightmoveCrest NicholsonBarratt DevelopmentsPersimmonTaylor Wimpey