First time buyers have been having a hard time recently but one government minister is showing signs that he wants to help!
Grant Shapps, the housing minister, has acknowledged that house prices are currently out of the reach of most first timers, a situation he classes as horrendous.
Shapps wants to engineer rationality in the housing market by making sure that earnings rise at a higher level than property values. He said that in a rational market, wages would rise by 4% whilst property prices rose by 2%.
He also wants to encourage property developers and local councils to build more properties to depress the market.
This all seems well and good and cheaper houses would make it easier for people planning to take out a contractor mortgage to buy a property. But is it a pipe dream or are his plans feasible?
Forecasters and economists don’t believe Shapps’ dream will become reality.
Howard Archer from Global Insight pointed out that the UK’s home-owning psychology means it will always be preferable to buy rather than rent. Analysts from the firm expect to see house prices fall by about 6% this year, but Archer points out that they will increase again once inflation causes commodity prices to rise across the board. It will therefore be impossible to stabilise the housing market unless there is dramatic intervention from the government, which he says would be unwelcome.
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