Toy story: It’s not about avocados! The trouble with housing policy

Posted: November 17, 2017 in News

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Estate agent Strutt & Parker managed to offend a whole generation this week when it claimed millennials would have a better chance of getting on the property ladder if they spent less on luxuries.

The millennial generation is often chastised for wasting its money on fads such as avocado toast and flat whites and then complaining that they don’t have any funds left to save for a mortgage deposit.

There is an argument for watching your spending, but in an environment where house price growth continues to outpace wages, it is by no means easy to save to get on the property ladder.

The government will claim it is helping with savings schemes such as the Help to Buy ISA – which lets first-time buyers save for a deposit tax-free – or its equity loan mortgage scheme, which helps buyers access a home loan with just a 5 per cent deposit.

But all this is useless if there aren’t enough homes.

Developers will say they are building more and can point to 2016 house building data that shows supply is now up close to the 2007 peak, but much of this is new builds. Not everyone wants to live in a new build property, especially with the ongoing debates about rising ground rents.

Right now, the government is essentially pushing up demand for purchases with schemes such as Help to Buy, while builders are left to cope on their own.

Chancellor Philip Hammond risks pushing demand up even further if he, as rumoured, provides stamp duty cuts for first-time buyers in his Budget on Wednesday 22 November.

This won’t suddenly make loads of cheap properties available.

What is really needed is support for everyone so current owners can upsize and downsize. That will unfreeze properties in the chain for all sorts of buyers.

This in turn may incentivise developers to build better and more properties to keep up.

More supply of both new and old properties should see prices coming down.

That leaves a lot more money left for avocado toast!

 

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