Thursday, 29 December 2011

First-time buyers may be the losers in shared equity scheme

The Institute for Public Policy Research (IPPR) claims that thousands of homeowners may have overpaid for a new flats bought using government shared equity schemes.

Under the HomeBuy Direct scheme, the government and a housing developer jointly fund a loan of 30% of the cost of a property, so that the purchaser only needs to pay a mortgage on 70% of the value.

But the IPPR says the biggest beneficiaries have been large housebuilders, which have used the scheme to sell an oversupply of properties, particularly one- and two-bedroom city centre apartments, at a time when house prices have been falling. The result is that the government has in effect propped up weak housebuilders.

In 1997, according to the Office of National Statistics, the national average wage was £16,666.
According to the Nationwide Building Society the Average House price in 1997 was £55k.
£16,666/£55,000 = 3.3x INDIVIDUAL salary [mortgage]

The Average First Timer Buyer mortgage multiple in 1997 was just £41.5k [Council Mortgage Lenders]
And the Average FTB mortgage multiple in 1997 was in a range of 2.3x - 2.5x Salary [Firstrung]
By 2007, at the peak of the boom [according to the Office of National Statistics] the national average wage had risen to £23.5k
The Average House Price in 2007 was £185k. [Nationwide Figures. Halifax had estimated AHP higher than £185k]
£185,000/£23.5k = 7.8x INDIVIDUAL salary [mortgage]

2011 Average House Price £166,764 [Nationwide]
2011 Average Wage £25k
£166,764/£25k = £6.6x INDIVIDUAL salary [mortgage]


The average house Price rose by 300% in a decade, from 1996 - 2006 as the median UK wage rose by just £6.5k.
And even if the average house price lost over 50% of its massively overinflated price tag, to take it back to its long term measure of affordability, [and the Base Rate returned to its long term average of 5%] Utilities have trebled, and Council Tax doubled under Labour, not to
mention rising inflation in other staples like food. And its only going to get worse over the next ten years.
There are literally millions of 'priced out' people, who have watched house prices rise year after year, and worked HARD for ten years, and whom have nothing to show for it.
No Capital. The ability to work for something you can call your own, 'private property' is a cornerstone of democracy.

I agree, no one ever got rich by borrowing money.

1 comment:

  1. Hello ,
    Property developers have been ones to gain from the government scheme aimed at buyers on low incomes. Claims think tank thousands of homeowners may have overpaid for new flats bought using government shared equity schemes, according to a report. Thanks.....