The UK housing market has become “too big to fail” after a series of government stimulus measures, according to the head of one of the country’s biggest housebuilders.
Interventions over the past year — including a tax break, an extension to the Help to Buy subsidy scheme and keeping construction sites and estate agents open when many other businesses were closed — have supported prices, tying economic sentiment ever closer to the property market. This makes further intervention to boost the market even more likely, according to Greg Fitzgerald, chief executive of Vistry Group.
“Is the housing market too big to fail? Particularly coming out of a pandemic with all this public debt, can prices fall? I can’t contemplate that,” he said.
The UK budget on Wednesday extended by another six months a temporary reduction in the stamp duty property purchase tax that has been in place since July. Buyers will now be able to save up to £15,000 on their transaction until June 30, and up to £2,500 from then until September 30.
The chancellor also announced a mortgage guarantee scheme that will support lenders to offer mortgages to buyers with deposits of as little as 5 per cent of the property value.
These moves have been billed as part of the government’s efforts to turn “generation rent into generation buy”, but property analyst Neal Hudson said they will primarily boost the property market in general and support prices.
“The housing market is so central to our economy, to consumer spending, to our personal sense of worth in some cases. A house price crash for any government, particularly a Conservative government, would be politically very, very challenging,” he said.
There is also evidence that sales might have been strong even without the extra government support announced on Wednesday.
Over the past four weeks, Vistry Group sales have been at historically high levels, the company said, even though anyone buying in that period would have expected to miss out on the stamp duty holiday. The company expects to more than double pre-tax profits this year and its share price has risen 9 per cent over the past two days.
Property sales were also on the rise before the stamp duty holiday was announced in July last year, partly because demand built up while the market was in effect closed between March and May last year.
But according to Fitzgerald, the impact of coronavirus on property sales runs deeper. “The pandemic has created a market: the divorce rate is up; people are thinking: do I want to live in a city, do I want to live in a high rise, do I need an office? . . . I said at the end of one of our board meetings in March 2020: who is going to buy a house with all this going on? It’s turned out to be a case of: who isn’t?”
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2021-03-04 14:33:04Z
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