The government plans to encourage 10,000 first time buyers onto the housing ladder through its ‘Firstbuy’ programme, announced in today’s Budget. The plans, which are set ro cost the taxpayer £250m, will give first-time buyers on low incomes access to government equity investments to help them onto the housing ladder. But while it might sound like welcome support for would-be home-owners, the measure is bad news for both buyers and taxpayers.
House prices are precarious at present, with leading indicators implying big falls are around the corner. All over the country, prices are running at high multiples of average earnings – a good long-term indicator that they are unsustainable. This, combined with imminent interest rate rises from the Bank of England and deep public sector cuts starting to bite from April, means that further house price falls look inevitable.
In these inauspicious conditions, now is not the time to be using public money to encourage vulnerable people to risk their own savings investing in a market that is heading downhill fast. This plan is a leg-up – but it’s a leg-up to the noose of negative equity.
The budget also announced new planning rules and land auctions that should make home building easier. These are welcome changes and a far more effective way to support first-time buyers in the long-run without plunging them into negative equity.
Ian Mulheirn is director of the Social Market Foundation
