Jan Crosby, Head of Housing at KPMG, said: “OBR forecasts released alongside the Budget highlight the dramatic inflationary impact the housing policy is having on the market. The OBR is now forecasting that house prices will rise by 8.6% in 2014 to 2015 and 7.4% in 2015 and 2016: these increases are at levels not seen since 2007. With a 95% mortgage through help to buy this creates the conditions for the house buyer’s equity to double over the next 2 years – not surprising that more and more want to get on the housing ladder.
“The problem is that housing supply changes slowly but demand is quick to change. This imbalance needs to be taken into account in policy measures."
“Extending help to buy becomes even more necessary in this environment since the equity required to buy into an increasingly high value property market becomes even more out of reach for the average first or second time buyer."
“Make no mistake, supply side measures need urgent action and with the Bank of England being encouraged to be increasingly vigilant of the housing froth it is hard to see monetary policy not being influenced. The themes of increasing finance to SME’s, Garden Cities, facilitating custom build housing and public land release are all sensible supply measures – but they must be implemented swiftly.”
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.