Is it happy days for homeowners, or will change crack the market's foundations?

Melanie Bien reports on the likely winners and losers in the Government's proposed shake-up of the British housing sector
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The Independent Online

Limited housing supply, price volatility and the length of time it takes to complete a transaction were the focus of a number of studies issued last week looking at ways of improving the British property market. Gordon Brown's pre-Budget report added to the mix in bricks and mortar.

The Housing Bill

Introduced in Parliament on Monday, the long-awaited Bill was lacking in surprises as most of the proposals have already been discussed in detail.

Potential winners: First-time buyers will save hundreds of pounds as a result of the introduction of the controversial Home Information Packs (HIPs), also known as sellers' packs. Instead of buyers having to fork out for surveys and local searches, vendors must provide these details.

¿ All homebuyers will benefit in that they are fully informed about a property's condition before making an offer. This should speed up the process and reduce the risk of gazumping - where the vendor accepts one offer, only to sell out to a later, higher bidder.

¿ Those relying on affordable housing will benefit from pro- posed changes to Right to Buy, the scheme enabling local authority tenants to acquire their homes at a discount.

A shortage of affordable housing for those who really need it is being created as ex-council tenants sell their properties in the private sector to take advantage of rapidly accelerating house prices.

Under current rules, those who sell up within three years of buying their property must pay back the discount they received on the purchase price. Under the proposals, the early resale period will be extended to five years, encouraging homeowners to stay put for longer.

¿ Responsible tenants will benefit from proposals to license private landlords in areas where anti-social behaviour and crime is rife. Landlords will have to prove they are worthy of qualifying for a licence from the local authority, reducing the number of rogue operators.

Potential losers: Sellers will have to pay in the region of £600 for an HIP - and there's no guarantee of finding a buyer. If a property remains on the market for several months, a second survey may also be required as the first becomes out of date, pushing costs up still further.

The Miles Report

The aversion of UK homeowners for long-term fixed-rate mortgages is the focus of the report by Professor David Miles, commissioned by the Chancellor because he believes our preference for variable-rate deals makes us vulnerable to changes in interest rates and is behind the boom and bust of the housing market.

In his interim report - the final one is expected in the spring - Professor Miles concludes that short-term discounted deals are unfair in that existing mortgage customers are subsidising new ones on the cheaper rates. But Simon Tyler, at broker Chase de Vere Mortgage Management, counters: "Instead of suggesting that short-term discounts are banned, Professor Miles should have said that it should be compulsory for lenders to draw attention to them. People on standard variable rates have long been used by lenders to increase their profit margins, and that would help ensure everybody was at least aware of their options."

Potential winners: The Government. If all homeowners took out long-term fixed-rate mortgages over 25 or 30 years, rather than short-term fixes and discounts, stability would be assured. This would make joining the single currency a more viable option.

¿ Homeowners who don't shop around for competitive loans. If you stick with your lender's standard variable rate, you could be subsidising new borrowers. But if everyone is on a long-term fix, others won't get a good rate at your expense.

¿ Anyone who values stability above all else. If you need to know what your payments will be for the next 25 years and don't mind reduced flexibility, a long-term fixed rate is ideal. Of course, such deals are already available but the take-up has been limited compared with shorter fixes. Cheshire building society has a 25-year fix at 5.58 per cent for those borrowing 95 per cent loan to value, while Leeds & Holbeck charges 5.99 per cent.

Potential losers: Most of us will lose out if long-term fixed-rate deals are introduced which are neither less expensive nor more flexible than those available now. The UK mortgage market is the most competitive in the world, argues David Bitner, head of product operations at independent adviser The MarketPlace at Bradford & Bingley. It has hundreds of different home loans to suit all possible circumstances, and removing this choice, in favour of 25- or 30-year fixes, would stifle it. "As it stands, long-term fixed rates come at the price of higher payments as well as loss of mobility," warns Mr Bitner.

The pre-Budget report

Fears that Mr Brown would raise stamp duty on house purchases were not realised in the forerunner to next spring's Budget. But he did miss an opportunity to make the banding system fairer.

Potential winners: All homebuyers. No rise in stamp duty means we won't have to pay more than the current 1 per cent on purchases between £60,000 and £250,000, 3 per cent from £250,001 to £500,000, and 4 per cent on anything above £500,000. No duty is payable on properties costing less than £60,000, as before.

Potential losers: All homebuyers. While stamp duty hasn't increased, property prices continue to rise, pushing more of us into higher duty bands. The Chancellor ignored calls to introduce a fairer banding system which could have meant that someone buying a £270,000 property would pay no duty on the first £60,000, 1 per cent on the next £190,000 and then 3 per cent on the last £20,000. This would result in a bill of £2,500, rather than the current £8,100.

¿ The introduction of Land Transaction Returns at the start of this month will also affect the cost of a house purchase and how long it takes. Solicitors must now provide a detailed account of what's included in the sale to ensure that buyers don't bump up the value of fixtures and fittings - as a way of claiming that the purchase price of the property itself is lower - in order to pay less stamp duty.

The Barker Review

The record low level of housebuilding is the subject of a preliminary report from economist Kate Barker. In the past 10 years, 12.5 per cent fewer properties have been built compared with the previous decade, resulting in young first-time buyers being priced out of the market.

Land supply is identified as the cause of the problem, with the current planning system viewed as too slow, leading to intense competition among housebuilders. Ms Barker's final recommendations will be released in March.

Potential winners: First-time buyers will benefit, as an increase in the number of houses built should keep a lid on prices and reduce volatility.

Potential losers: Developers and housebuilders may suffer, as increased supply means they won't benefit from artificially inflated prices. Ms Barker's recommendation that they introduce more innovative forms of construction may also affect profits.

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