News and Press releases

Housing market can be helped by not interfering, writes David Alexander

31/12/2010

Also hampering recovery is the situation with first-time buyers, the initial and most important link in the housing chain. The demand for higher deposits, tighter FSA regulations on mortgages and tougher lending criteria for individual applicants will all combine to keep down – and perhaps even further dampen, first-time buyer demand.
For example, a self-employed mortgage applicant will now have to supply a three-year record of company accounts, which effectively disbars any young entrepreneur whose business is less than three years old from obtaining a home loan.

The one piece of good news for homeowners is that barring some unforeseen world crisis which causes further angst in the money markets, interest rates are likely to remain at their current level for the whole of 2011 and perhaps well into 2012. Many small companies are managing to keep their heads above water only because of low interest rates so politically an increase is a non-starter. Also, low interest rates will limit the number of arrears and repossessions.

The UK and Scottish governments can help simply by not interfering. If political initiatives have any affect at all it is usually to distort the market. They also invariably lead to more bureaucrats, whose involvement filters down to the general public in the form of a more expensive and cumbersome buying and selling process.

Home Reports are a prime example of government interference achieving exactly the opposite of what was intended. Their intention was to end multiple surveys (or valuations) but market pressure was bringing these to an end just as the legislation was enacted. As was predicted, lenders will not rely on a vendor’s valuation for mortgage purposes so even if just one offer is received for a property, it will be subject to two valuations. Also, vendors are commissioning multiple valuations until a surveyor comes up with the ‘right’ figure – i.e. the price sellers hope to achieve. If Holyrood wants to help the market in 2011 it could start by abolishing home reports.

David Alexander is head of the rental and estate agency, DJ Alexander.

THE SCOTSMAN, 31 December 2010

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