Boris Johnson’s latest proposal for the housing market is “another risky, spontaneous announcement aimed at temporarily inflating the housing market” according to the boss a major property firm.
David Alexander, the chief executive officer of DJ Alexander Scotland, part of the Lomond Group, told City A.M. today he believes that the comments from the Prime Minister that he would be open to encouraging 50-year mortgages with debt potentially being transferred to the next generation are “unhelpful and fail to address the significant, long-term issues in the housing market.”
Johnson is looking at encouraging long mortgages as a way to get more young people onto the housing ladder.
While a number of banks already provide products that mean parents and grandparents can guarantee loans to adult children without big deposits, new plans would allow family homes and their mortgages to be inherited.
“The Prime Minister’s comments may be aimed at encouraging greater home ownership but instead have the potential to encourage a short-term boom in the housing market followed by a long-term bust,” Alexander said.
He added: “Another month and another off the cuff housing policy touted by Boris Johnson. While these announcements attract headlines and perhaps energise parts of the electorate, they lack any sense of having been thought through.”#
Alexander explained that “the implications of 50-year mortgages are quite severe and coupled with the recent pronouncements on extending Right to Buy and enabling those on low incomes to use benefits to buy properties rather than rent seem to be ill thought through, back of the cigarette packet ideas rather than coherent housing policy.”
“Now is certainly not the moment to fuel growth in the housing market. Prices have risen at an unbelievable rate in recent years so any encouragement of the market should be treated with caution.”David Alexander
Alexander pointed out that “it is easy to forget” that it took average house prices in Scotland nine years to recover from their peak in May 2008 after the last property crash occurred.
Average prices have risen by £42,313 since May 2008 to April 2022 but that £35,040 (82.2 per cent) of that increase has occurred in the last two years since May 2020, he continued.
“The housing market does not need longer mortgages, less stringent affordability criteria, or higher borrowing multiples. If you want to stabilise or reduce prices, then you need to increase supply,” Alexander stressed.
“Demand has been outstripping supply for years in both social housing and the private sector and unless this is resolved you will continue to see prices rising.”
In conclusion, “a more coherent approach would be to encourage more homebuilding through an easing of the planning system; much more social house building; and encouraging investment in the private rented sector to continue to meet the demands of people not currently buying and not eligible for social housing.”
“A 50-year mortgage is simply temporarily sustaining the market and passing debt on to the next generation which does nothing to resolve the long-term underlying issues in the housing sector,” Alexander said.