Housing heartache: is there light at the end of the tunnel?

9:48am Wednesday 3rd September 2008

MOST people believe Gordon Brown had to do something. With house prices falling fast and fuel and food prices rising, the Prime Minister needed to provide some light at the end of the tunnel.

While not exactly a beacon, axing stamp duty on all properties below £175,000 for a year and providing “free” loans of up to 30 per cent for first-time buyers in England – all part of his “recovery plan” – could just be the kick-start the housing market needs. Kick-start the housing market, and the rest will follow.

Six months ago, Colchester was one of the fastest growing towns in the UK. It still is.

Colchester councillor Paul Smith, head of resources and business, said in the past few years more people have come to live in the borough than Government statistics predicted. There are now 160,000, 5,000 above the estimate, and that figure is continuing to rise. By 2021, the population should have risen to 173,800, and it is currently on target.

“North Essex and Colchester are attractive places to live for many people and I have seen nothing which would stop them moving here,” said Mr Smith.

SIGNED “Yes, I am optimistic for the town, but that doesn’t mean we don’t have things which need putting right.”

Mr Smith believes the Government plan to axe stamp duty (one per cent of the property’s value) for the lower end of the market is “a help”, but it could do more.

“I think the Government are more interested in appealing to home owners as voters than dealing with the UK’s housing problems,” said Mr Smith. “Colchester now has 8,000 households on our council house waiting list, and what we would say to this Government is ‘let us build council houses’.

“We have not built a council house here for nearly 20 years. If we could get on with this, it would be a boost to the town’s economy, because, with so many on the waiting list, there would be work for many associated with the building industry.

“The council has the land, but we are hampered by current legislation from build ing council houses how we would like to build them, and we need council houses. We have to start building them again.”

Mr Smith would also like more details on other sections of this “recovery plan”, including the Government’s mortgage debt scheme where councils or social housing landlords pay off the mortgage debt and, instead, charge rent “at a level they can afford” and the loans plan for first-time buyers. He thinks the latter could work, especially in Colchester and the rest of the South-East where getting on to the housing ladder is more difficult.

“But it all depends which form the loan takes. If it were interest-free and interest rates rose, that would mean everything would rise, including salaries, which would make the loan a lot easier to repay,” he said.

“But if it were not interest-free or if interest rates remained the same, repayment would be harder.”

Mr Smith believes the future is not as doom-laden as Chancellor Alistair Darling predicted, certainly not in Colchester and north Essex.

“We are pushing ahead with Colchester’s cultural quarter (Queen Street/Vineyard Street/St Botolph’s Street) which is vital to the town’s development,” he revealed.

“We have now signed the contract with the German developer Grebe to build a three-star, 120-bed hotel with shops on the site of the former Keddies store, and a third of those shops will be reserved for local businesses.”

But the pace has slowed in the house-building market. In May, Persimmon Homes decided to put on hold the 117-home development off the town’s Cowdray Avenue until “mortgage market conditions” improve, while other developments are moving at a much slower pace. People cannot or just don’t want to commit to buying. Has Mr Brown’s “recovery plan” installed confidence?

Mr Smith thinks it is a start. “I welcome anything the Government does to help the housing market,” he said, “but it cannot just rest on this. There has got to be more initiatives.”

Meanwhile, Boydens estate agency – which has branches in Colchester, Frinton, Kelvedon, Braintree and Sudbury – is quietly celebrating.

“We have had quite good sales figures for August, particularly in Colchester, and have bucked the trend,” said managing partner David Boyden. “I am quite optimistic about the future, but the cut in stamp duty has not exactly sent me hip-hip hooraying.”

For him, the “leak” that it was a possibility, then the Government denial, was not helpful.

“Many who were considering buying or selling their homes held back,” he said. “They did not want to make a serious commitment and were stalling their final decision until they knew what would be happening with stamp duty.”

But he is not dismissing Mr Brown’s “recovery plan”.

“However small it is, in the bigger picture of all this negativity, it is at least something,” he said.

“Another thing is people are becoming far more realistic about how much their homes are worth.

“This makes it easier if they want to sell. When they buy it will, hopefully, be a property where the owner is similarly realistic, which means no-one is making a financial loss.”