Author Topic: Why new homes don't help the housing market  (Read 5832 times)

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Why new homes don't help the housing market
« on: December 28, 2011, 09:50:36 am »
The government is misleading the public by annoucing subsidies and incentives to "help" first time buyers buy new homes to "kick start the housing market".
All new homes are the end of a housing chain.
If a first time buyer purchases a new home rather than "used" home on the open market they cannot start a housing chain.

The housing chain
At the start you have someone buying a home that is not dependent on selling a home they own.
These are normally first time buyers, but can be cash buyers, people becoming owners again after renting, companies, or people new to the country.
At the end of the chain are people who are not moving into another home on the market.  In effect the chain ends with them.
This can be because of people emigrating, moving into a care home, an executor's sale, or people buying a brand new home.

The first time buyer effect
If ten first time buyers buy a new home, that results in ten sales for the house builder.
But if the same ten first time buyers buy a home on the open market that starts ten housing chains, which depending on size, could result in ten sales for each chain, giving a hundred property transactions from just ten first time buyers.

That is 100 Stamp Duty Land Taxes, 100 estate agent's commissions, 100 house removals, 100 legal conveyances, not to mention all the other associated industries that benefit from a fluid housing market - carpets, curtains, furniture, decorators etc.

By promoting new homes, through planning de regulation, concessions and underwriting mortgages, the government is choking the housing market as new homes stop both ends of the housing chain.
This only benefits a few very large national house builders, while many companies both large and small, are losing out because the overall housing market is being put a poor second to the new home industry.

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