Budget changes could threaten housing market recovery

Citation

(1998), "Budget changes could threaten housing market recovery", Property Management, Vol. 16 No. 3. https://doi.org/10.1108/pm.1998.11316cab.012

Budget changes could threaten housing market recovery

Budget changes could threaten housing market recovery

Keywords Housing market, MIRAS

Recent steady growth and consolidation in the housing market could be harmed if the Chancellor hits MIRAS (mortgage interest relief at source) and stamp duty in the Budget, says the National Association of Estate Agents (NAEA).

"Our members are very concerned ­ especially with talk of another possible increase in interest rates ­ that the more vulnerable sections of the housing market could be seriously affected", said Hugh Dunsmore-Hardy, Chief Executive of the NAEA.

"This would be particularly so in those areas where the recovery is still fragile, and also in the context of overall transaction levels, which are still well below those recorded in the 1980s ­ which puts paid to the 'property boom' headlines we read about during 1997."

Recent interest rate increases have undoubtedly slowed the market down, and this is supported by figures from NAEA surveys which show that this year only one-in-three estate agents are reporting increased year-on-year business levels as opposed to two-in-three last January.

The NAEA's latest Housing Market Report for January, shows, however, that the recovery is gathering pace in some areas, where spring is very much in the air, with requests for valuations and viewings increasing.

"It appears that the public's mood of caution is slowly changing to confidence, with more people deciding now is the right time to move. But speculation concerning fiscal measures in the Budget is in everyone's mind", said Mr Dunsmore-Hardy.

The NAEA survey reveals that while levels of market appraisals and instructions are heartening, they are not as high in all areas as they were last year ­ 56 per cent of agents reported less activity.

"We would urge the Chancellor to avoid further fiscal measures in the housing market at this time. Successive increases in mortgage rates have had, and are continuing to have, a dampening effect on existing confidence in the market, and the time is right for a prudent pause to evaluate the overall effect."

More than two-thirds(68.1 per cent) of estate agents surveyed said that the market is improving, according to the NAEA Housing Market Report. Lack of property for sale remains a key factor, however, and high demand levels are highlighted by reductions in the average number of viewings taken to sell a property (now 7.5 from 8.6 last year), and the overall length of time from instruction to sale completion (11 weeks against 12 last year).

NAEA President Andrew Jeffery, commented: "At present there are indications that we may be seeing the solution to the vicious circle which has beset the market for much of 1997 ­ homeowners are reluctant to put their property on the market until they find the house they want; and then do not find that property because too few people are putting their homes up for sale. This Catch 22 situation appears to be slowly resolving itself as more property comes on to the market and the demand-supply imbalance rights itself".