A Tayside property expert has blasted critics of Chancellor George Osbourne’s plans to assist the housing market.
Lindsay Darroch, partner and head of property at Blackadders, said the criticism is “fuelled by a lack of knowledge of the housing market and the impact it has on the UK economy.”
Mr Darroch said the lack of first-time buyers coming into the market locally is a real problem which will be helped by Mr Osbourne’s plans.
The Government will guarantee mortgages for three years from January where applicants can put down a 5% deposit.
Ministers aim to extend the current Help to Buy scheme to make it easier for first-time buyers or those looking to trade up to get access to home loans if they do not possess substantial equity of their own.
Mr Darroch said: “The main criticism is that the Chancellor’s plans will create a housing bubble making it harder for first-time buyers to get on the ladder. I totally disagree with this.
“For a free-flowing housing market, 40% of purchasers need to be first-time buyers. I have not seen recent data in relation to this figure but understand it is somewhere between 18% and 20%.
“The lack of first-time buyers coming into the market is the real problem and I think the Chancellor’s two schemes, one aimed specifically at first-time buyers purchasing new build properties and the other the ‘help to buy’ scheme (assisting all purchasers), will mainly help first-time buyers and will alleviate this problem.
“An increase in first-time buyers will allow the market to flow again and will benefit all potential sellers.
“Although this will have an impact and we will see an increase in property prices, I don’t expect it to be too dramatic as there is a glut of properties available to suit this type of buyer.
“As the market stabilises and we start to see controlled house price inflation, banks will grow in confidence and start lending to the wider economy.”
Mr Darroch said the lack of bank lending has been one of the factors holding back the economic recovery. He said one area where he believes the Government could do more is to encourage banks to lend to property developers.
“I appreciate that this is a high risk strategy and I would want the Government to wait and see what impact the two new schemes have on the market before any further intervention.
“My feeling is that once the banks start to see a stabilised market along with house price inflation they will naturally be more inclined to start lending to this sector again.
“If this doesn’t happen I fear we will struggle to deal with the housing shortage in the UK.
“This is something the Government needs to monitor closely. As a caveat to all of the above I would add that once the housing market starts moving freely and the economy starts to pick up, the Government should look at some stabilisers to give them more control over the housing market and to prevent the overheating that we saw in 2006.”