Housing market `revival' challenged by Labour

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A row broke out yesterday over the prospects for the housing market, the health of which could have a decisive influence on the next election.

Hard on the heels of a report from the Halifax Building Society forecasting a modest revival next year, Labour's housing spokesman Nick Raynsford rushed to counter the traces of optimism in the report, and blamed the Government for the continuing depressed state of the market.

Hundreds of thousands of people have had their homes repossessed and many more are in negative equity, Mr Raynsford said, quoting a recent report by the stockbrokers UBS Phillips & Drew which estimated that 1.4 million people were in negative equity in the third quarter of the year, an increase of nearly 30 per cent on a year ago.

Rather than helping homeowners in difficulty, the Chancellor has cut mortgage tax relief and reduced help to unemployed homeowners, Mr Raynsford said.

Although the Halifax admits the Chancellor did nothing directly to help revive the housing market in last month's Budget, it is forecasting a 10 per cent increase in the number of properties changing hands next year and again in 1997, but only a 2 per cent rise in prices next year, rising to perhaps 5 per cent in 1997 and 1998. The forecast is based on the fact that mortgage interest rates are at historically low levels, and more importantly, many people now believe interest rates are likely to remain at these levels or even fall further, the Halifax argues.

House prices are once again low relative to incomes after falling an average 15 per cent over the last six years, mortgage rates have started falling again in recent weeks, earnings are slowly edging upwards, personal taxation will come down in April, and many experts agree that the outlook for the housing market is better than at any time since 1989.

This is counterbalanced, however, by continuing job insecurity, cuts in income support for those who do lose their jobs, and increasing pressure on individuals to pay for insurance policies and pension plans as well as savings and investment schemes, which compete with mortgages for any surplus income.