Monday, 12 March 2012

The Right To Buy

Today Mr. Cameron launched a dual assault on the UK housing market. The right to buy scheme has been resurrected allowing council owners to buy their properties for up to £75,000 below market value, while the 'new buy' scheme has been supercharged allowing first time buyers to purchase new build properties worth up to £500,000 with just a 5% deposit!!!!!

The size of these offerings is also impressive as the government will allow 100,000 purchases under the 'new buy' scheme which (assuming 250k per house) is £25bn of housing stock!

Putting this in perspective, Barratt Developments (a leading UK housebuilder) has an inventory of £3bn of which half of that is undeveloped. Carrying on this theme, Persimmon have inventory of £2bn (£1.5bn undeveloped), Bellway has £1.2bn (£0.7bn of which is undeveloped), Taylor Wimpey has £2.6bn (£2bn undeveloped.).

Of the UK's biggest housebuilders, total new builds (both pipeline and completed) stand at c.£11bn, which isn't even half the government's firepower. Even including other housebuilders it is obvious that this is going to have a huge impact in the property market.

These projects will come as a welcome relief to housebuilders who have been hit by increasing mortgage costs (cheers Halifax!) and to Convervative MP's who feared the party wouldn't do enough to help the working class.

Now about the budget deficit....

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