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Written by rosalind renshaw

The RICS is today calling for a taxpayer-backed NewBuy type of mortgage scheme to be made available for first-time buyers of secondhand properties.

It says that currently first-time buyers are trying to get on to a housing ladder that has no rungs.

It says that such a scheme could either lend or guarantee first-time buyers ‘a reasonable deposit’ in return for a stake in their homes.

The RICS says that this would free up stagnant chains, give first-time buyers access to the market, and provide the Government and taxpayer with ‘a clear return on investment’.

The organisation says that currently, 38% of potential buyers are trapped in rental accommodation as they cannot afford to access the property market. The RICS also says that one in five people who do try to buy are seeing their purchases fall through, due to difficulties with mortgage finance.

The NewBuy scheme offers purchasers – not just first-time buyers – 95% mortgages, with lenders being given indemnities, backed jointly by developers and taxpayers, to cover their losses if the property has to be repossessed and falls into negative equity.

The scheme covers new-build purchases of up to £500,000, but has come under fire for its high rates.

Peter Bolton King, RICS global residential director, said: “Many first-time buyers are facing the prospect of a property ladder with no rungs.

“With lenders requiring such hefty deposits and affordable mortgage deals out of reach for most, a generation of potential home owners are facing an uphill struggle.

“The RICS would like the Government to consider a mortgage indemnity scheme that works for the whole market, not just new-build. NewBuy could potentially lead to market distortion by reducing demand for secondhand property.

“Without allowing first-time buyers greater access to the second hand market, chains and transaction levels will continue to stagnate.”

Comments

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    First - it's a shame this forum software is so primitive - you can't even reply to someone ...

    Still, to Ray Evans - I have copied your post below so I can respond to it point by point - unfortunately this forum does nto allow you to distinguish ....

    [you]Not totally tongue in cheek! One of my points was really for those who want at least a 50% fall in prices - what would be the knock on effect?.[/you]

    [me] It would be disastrous - shame people didn't think about that when they were ramping the market up (that's everyone, not just agents.). We had a property boom/bust and recession in the 80s and 90s so it's not as though it was a long time ago. Just 10 years later and we were at it again. But, what is the alternative? 30 years of stagnation? And no lessons learned. (Although my earlier comment suggests no-one ever learns anything) [/me]

    [You] Part of what you say I agree with - but certainly not all, especially selling at same price as purchase price, that is rather silly? [/You]

    [Me] Why is it silly? All other things being equal (no inflation, no mass immigration, no deliberate land shortages) - why should property automatically inflate? Beats me. [/Me]

    [You]Property 'values' help to drive spending and inflation, it got out of hand.[/You]

    [Me] Not sure what you mean by this. Property values have increased over the last 40 years because of high inflation, relaxed lending criteria. Because of effectively infinite demand (we all want to live somewhere nicer) and because most people have to borrow to buy a property - the price is a product of the cost and availability of credit. Okay, a buoyant property market is a big factor in providing demand in an economy - as a lot of spending takes place when people buy properties but, on the whole, it's based on borrowed money and is, therefore, finite.[/Me]

    [You] I believe that it the government became involved in controlling residential prices it should be on a comprehensive basis. God help us though - because as usual they would bring party politics into play and also get it wrong[/You]

    [Me] No-one needs to try to control a free market. They just need to control the supply of credit. It's not difficult and it used to work when I were a lad. Save for 2 years with a building society for a deposit and then be lent a maximum of 2.5 times your salary and 0.8 times your partners. This made the assumption that most people would buy in their 20s, and in their 30s would be earning more money, would have children and their partner would stop work. Boy, we didn't realise what halcyon days they were.[/Me]

    [You]
    Idea!
    Legislation so that Selling prices should be no higher than the general inflation figure since purchase plus selling expenses and cost of proven genuine improvements. It would add an element of general inflation control as well? [/You]

    [Me] Not necessary and almost definitely not workable [/Me]

    • 26 July 2012 16:06 PM
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    Is it me or is Peter Bolton living in a parrallel universe?

    This scheme suggestion is completely useless!
    Whoever gave you your job must be very proud NOT!

    Someone has got to look at the bigger long term picture...Agents/sellers bring house prices DOWN to realistic regional levels. From where I'm sitting the bubble is alive and well.

    3.5 x salary incomes and then me and my fellow FTB's will be interested - it's not rocket science.

    • 26 July 2012 13:22 PM
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    but I am trapped in a Ford Focus!

    @Peter Bolton King keep your daft ideas to yourself, just because you have got a new job it doesn't mean the world needs to have monthly PRs from you.

    Those in the industry simply ignore your claptrap and those outside think you represent our thoughts, please just shut up

    • 25 July 2012 16:59 PM
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    the number of people in china and india are staggering..for perspective uk 56 mill US 330 mill

    india 1,21 billion
    china 1.35 billion

    this means uk wages are set to fall imo as most in india and china will work for much less and longer

    which is why a period of DEFLATION is likely

    just like japan...properties are 40% less than 1991..where then for buy to let?

    • 25 July 2012 13:41 PM
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    That's how things have happened in the past AC, for sure. I'm not so certain it will provide the get out of jail card this time though. There are a billion people in India and China clamouring to do the jobs of UK workers. Either our wages need to fall to be in line with theirs, or theirs rise to meet ours (or some degree of both). Until that happens, I can't see much upward pressure on UK wages.

    • 25 July 2012 13:14 PM
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    @rnr

    There's no confusion, it's just going to take a while my friend.

    NOW = STALLED/ FALLING MARKET = Deposits high, income multiples low, wages static, inflation a bit nasty

    NEAR FUTURE (1-3 years) = STATIC MARKET = Deposits medium, income multiples low, wages begin rising, inflation still a bit nasty

    FUTURE (3-5 years) = STATIC/ RISING MARKET = Deposits low, income multiples sensible, wages rising, inflation less nasty, interest rates rising

    FAR FUTURE (5+ years) = back to the old boom and bust cycle I guess

    • 25 July 2012 12:23 PM
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    So yet again Peter Bolton King is calling for more irresponsible lending to try to keep house prices at inflated costs putting the tax payer and ftb with all the risk.

    What's wrong with letting the market correct naturally ending all this biassed stimulus.

    Lower prices = lower deposits.

    What a div.

    • 25 July 2012 12:20 PM
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    Great, more fart-arsing about suggested by clear VIs.

    To the troll at 10:57, the market can't find its level with so many quarters ensuring it doesn't.

    • 25 July 2012 11:48 AM
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    Last time I looked we were not a communist state, you can rant all you like but the market will find its level, you change nowt guys, try working??

    • 25 July 2012 10:57 AM
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    "Legislation so that Selling prices should be no higher than the general inflation figure since purchase plus selling expenses and cost of proven genuine improvements. It would add an element of general inflation control as well?"

    This was built into the system. The government's preferred inflation figure used to take the cost of housing into consideration. Thus, if house prices go too high, inflation picks up and interest rate rises should swiftly follow to bring them back down again.

    Gordon Brown was having none of that though, and removed housing from the basket of goods used to measure inflation. A bit bizarre really, as housing is most people's greatest monthly expense. As house price inflation started hitting double digits a decade ago, interest rates were actually cut again and again. Cheap credit flowed into the property market, stoking an unprecedented bubble (it also meant that returns on standard pension schemes reduced, leaving folk like Ray dependent on the next generation paying for his retirement through higher house prices). The rest, as they say, is history.

    We're paying for this madness now and will be for a long time to come - the UK economy is reported to have shrunk by 0.7% last quarter, pushing us much deeper into recession.

    -------------------------------------------------------------------------------------

    Anonymous Coward - you've made a classic confusion between price inflation and wage inflation. At the moment we have the former not the latter, making houses less affordable, not more, as disposable income gets squeezed.

    Those looking to downsize are also affected by this, as the money they have locked up in an illiquid and depreciating asset is losing value compared to other goods and services in the economy. Someone who has had their house on the market for two years at £250K would have been better in real terms now if they had sold it initially for £225K back then and kept any downsizing funds in the bank.

    • 25 July 2012 10:34 AM
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    @Ray Evans. What you suggest wouldn't work. Houses rise in line with wage inflation and general productivity in the economy, not retail or consumer price inflation.

    I suggest we should have a fixed law (not one that is 'flexed' by politicians or regulators) that limits LTV's to 75% say. For financial stability purposes and to dampen prices. This is what Germany has and works very well for them. It is what the IMF are recommending. People save first and prove they can repay on a regular basis and it provides a much needed cushion for banks.

    But our shower continue to prevaricate and listen to the siren voices of various vested interests and get themselves into an awful muddle such as thinking they should retain hands on control of this lever (as if that would work!).

    • 25 July 2012 10:19 AM
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    @POTW on 2012-07-25 09:30:46

    Not totally tongue in cheek! One of my points was really for those who want at least a 50% fall in prices - what would be the knock on effect?.

    Part of what you say I agree with - but certainly not all, especially selling at same price as purchase price, that is rather silly?

    Property 'values' help to drive spending and inflation, it got out of hand. I believe that it the government became involved in controlling residential prices it should be on a comprehensive basis. God help us though - because as usual they would bring party politics into play and also get it wrong

    Idea!
    Legislation so that Selling prices should be no higher than the general inflation figure since purchase plus selling expenses and cost of proven genuine improvements. It would add an element of general inflation control as well?

    Just a thought..... ;>)

    • 25 July 2012 09:54 AM
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    help ftbs by raising interest rates,allow correction in prices and allow our kids to partake in society

    its our kids who will grow the economy

    allow banks and businesses to fail and the good ones will florish

    • 25 July 2012 09:42 AM
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    We're all socialists now.

    Why do RICs think I should pay my money towards people buying over priced homes exactly? To keep them in the manner they've become accustomed?

    Come on guys. Let's get back to some proper capitalism. Let the market work its wonders. Let prices fall as they clealy want to, and quickly so the market can reach a 'clearing level'. Transactions is what we want to get this economy moving!

    • 25 July 2012 09:32 AM
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    Ray Evans: 'What is never mentioned is the possibility that 'downsizers' second hand property (pension pot - 25+ years in the making) needs to be more.'

    Is that comment tongue in cheek? If you buy a property with a repayment mortgage over 25 years and, at the end, you own the property - great - you have effectively saved up the value of the property. Why should the value of the property increase over and above general inflation over that 25 year period .... given that any increase in value is created by the next generation taking on more debt.

    The simple fact is that, in general terms and the majority of circumstances, your equity is someone else's debt.

    If you paid your house off over 25 years and decided to sell the house to your children, how much would you force them to borrow to buy the house off you - over and above what you paid for it?

    If I bought a house for 200k, paid for it over 25 years, I reckon selling it to my kids for 200k (assuming I could not afford to simply give it to them) would be fair. Why would I rip them off?

    That's all that house price inflation above wage inflation is - a rip off of the next generation. Look at the lives we are forcing them to lead now - both parents working, kids dumped in nurseries 12 hours a day - all so we can have our unearned equity.

    • 25 July 2012 09:30 AM
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    Anonymous Coward: 'This will continue and eventually property prices will come in line with 4 times salary which is back to sensible lending and we can all get on with our lives again.'

    But surely the fact that a house devalues compared to a basket of groceries is academic if the wages used to buy the groceries - or house - are pretty static.

    For anyone out of the public sector (still most of us) you are lucky to keep your job let alone get a pay rise. If wages go up 1% a year how long will it take for the 4 times salary multiple to become reality? 30 years?

    As for

    • 25 July 2012 09:25 AM
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    I love it when people get in to the office before me, it gives me something to read!

    @PoTW and @rnr - the usual comments I see lads, but as usual, I won't blindly disagree with you.

    However, as previously mentioned, whilst prices have barely changed, values have dropped by about 10% already compared to the value of a typical basket of groceries.

    This will continue and eventually property prices will come in line with 4 times salary which is back to sensible lending and we can all get on with our lives again.

    @blank (put something in at least - it shows you care) for all and everything Stamp Duty is fine, the jumps are a pain in the backside I agree, but what would you do about it to maintain the revenue stream that the government needs to pay off the deficit?

    Would you have a flat 2% across the board which screws everyone paying less than £250k?

    Or would you have 0% below national average price and 3% for everyone else?

    Either way, a large part of the house buying population gets screwed over. And the perception would be that rich people are getting off with it too.

    BACK TO THE ARTICLE though:

    STOP MESSING ABOUT WITH MORTGAGES!

    Leave them alone. The banks cannot afford any more irresponsible lending and they should not be forced to.

    I have just passed my RICS and I have to say that I had to sit an ethics exam.

    It is not ETHICAL to follow this path of artificially propped up LTVs and is a recipe for disaster.

    • 25 July 2012 09:08 AM
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    Abolish the stupid SDLT thresholds and stop the 'jumps' which create inertia

    • 25 July 2012 08:53 AM
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    It's weird. What is never mentioned is the possibility that 'downsizers' second hand property (pension pot - 25+ years in the making) needs to be more.
    There is more than one side to this! ;>)

    • 25 July 2012 08:37 AM
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    Careful PTW - comments like that will see you sent to a re-education camp.

    • 25 July 2012 08:26 AM
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    It's weird. The only possibility that is never even mentioned is the possiblity that for FTBs to be able to buy second hand properties - the second hand properties need to be cheaper!

    • 25 July 2012 08:05 AM
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