This week Mortgage Solutions asked our experts will the proposed ban on leasehold homes improve the new build market?
Helen Pierson, head of business development at Mortgage Bureau wonders if developers selling leasehold properties will decide to withdraw leaseholds before the end of the consultation period.
James Chidgey, new homes relationship manager for Mortgage Advice Bureau says the plans should help make the process easier and less stressful for new home buyers.
James Ginley, technical director of Legal and General Surveying Services notes that the proposals should be supported by the mortgage and housing industry.
Helen Pierson, head of business development at Mortgage Bureau
Prior to this announcement we’d already begun to see some changes as a direct response to recent decisions by some lenders to tighten criteria in so far as leaseholds are concerned, so moves were already afoot to establish a type of self-regulation driven by those holding the purse strings.
Press coverage has also increased consumer awareness, with purchasers’ curiosity being roused as to how a lease will affect them not only now but in the future, which is good when it comes to making an informed decision.
It will be interesting to see if and how this announcement affects immediate sales of stock and whether developers selling leasehold properties decide to bite the bullet before the end of the consultation period, and if they do, whether this will increase the selling price and if so by how much?
One thing is for sure, whether or not the government’s ultimate decision is to euthanize leasehold terms for new build houses, it won’t address the shortage of supply vs demand and it’s this that is driving the market.
The practices of some housebuilders to sell houses as leasehold tenure, often with very onerous fees and ground rent charges, came to light last year.
So the news that the government is now seeking to ban this practice is welcomed, although many house builders have already ceased it, reverting to selling them as freehold.
It is imperative that more new homes continue to be built and sold, so anything that causes new home buyers to question the legal tenure of a property needs to be resolved quickly.
This is especially important at the time when the government’s flagship home buying scheme, Help to Buy, is being reviewed.
Hopefully this will be extended beyond its current closing date of March 2021.
Issuing the consultation paper with a short response time of mid-September shows the government is clearly minded to take the necessary action to ensure purchasers of new homes can in future have more clarity over what for many, particularly first-time buyers, is the biggest buying decision of their life.
The Department of Communities and Local Government (DCLG) is showing commitment to both buyers and the housing market by following through with the government’s pledge to “crack down on unfair practices in leasehold”.
This consultation is an opportunity for wider engagement in the market and for stakeholders to examine any unintended consequences of potential changes before they are implemented.
The government’s ambition of increasing the level of transparency and fairness in the housing market must be supported by the industry as a whole, and should only be a good thing for consumers in the long run.