Chancellor is urged to act on housing crisis

An online estate agent, BrightSale, has written to the Chancellor with a cost-free remedy for the housing crisis.

Jeremy Howard, financial director, said that the idea  – to lift the ban on Self Invested Personal Pensions (SIPPs) being able to invest in property – would be far more effective than a Stamp Duty Holiday.

He said: “It would certainly help the market, would cost the Government nothing and would satisfy the requirement for it to be seen to be doing something.”

From October 1 this year, holders of an estimated £100bn of pension assets will be allowed to transfer these into SIPPS.

But none of this money can be invested in residential property because of the Government’s last minute removal of it from the qualifying assets list in 2006. 

This is despite the fact that when the legislation was drawn up in the Finance Act of 2004, it was Government policy that residential property would be included. 

In the letter to Alistair Darling, the BrightSale directors say: “We understand that at that time the Treasury feared the impact of extra demand on an already tight property market.  We do not dispute that that may have been an appropriate decision then, but with prices now in free fall, surely now there is strong case for revisiting the restriction.

 “Lifting the restriction on residential property in SIPPs would not constitute a ‘bail out’ or involve intervention in the mortgage markets.  It would involve no ‘special favours’ to property owners.  It would pass any ‘fair and reasonable’ test because it would simply remove a restriction that, until 2006, the Government itself regarded as iniquitous.” 

The letter goes on: “The Government should not set the price of tradeable assets in a free economy.  But neither should the Government unnecessarily restrict investment where it is needed.  Price movements are telling us that investment is needed in residential property.  As you will also be aware, unless urgent action is taken at this time the Government’s goal of delivering 240,000 new homes a year may as well be torn up.

“Action is needed to break the vicious cycle of self fulfilling negative price expectations.  Many of our customers have marked down their properties by 20% and have still have had little success in attracting interest.  The market has virtually ground to halt in many areas of the country.

“Unlocking £100bn in SIPP capital has the potential to reverse the spiral of negative expectations and to get transaction levels moving upwards again.  It would have much more short-term impact than a Stamp Duty holiday and would not cost the taxpayer a penny. It is a far more logical response to the crisis and we urge you to look closely at it.”