Give and take

Finally I’ve found somebody who thinks that Help to Buy 2 is a good idea: the private equity owners of Foxtons.

I’m obviously exaggerating for effect here (I was just reminded of Simon Jenkins too for starters) but the London estate agent is famous for three things: its flashy sponsored Mini Coopers; the pushiness of its staff; and the timing of its sale in 2007. The founder of the company sold out to private equity firm BC Partners for £360 million just months before house prices and transactions crashed.

After a rare apology from BC Partners to its investors, and a rocky road to recovery, Foxtons is set to return to the stock market next month with a valuation of up to £500 million.  That spectacular turnaround may have a bit to do with some canny financial engineering but, as the Financial Times reports this morning, it has far more to do with the fact that its timing could hardly be better.

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On the rise

As the evidence for a housing market recovery mounts by the day, so is the impression that an old-fashioned dose of house price inflation is now seen as a very good thing by the government.

In a survey out this morning, members of the Royal Institution of Chartered Surveyors (RICS) report that activity is rising around the country and not just in London and the South East and that prices are up for the fourth month in a row. Yesterday, the Council of Mortgage Lenders (CML) reported that the number of loans to first-time buyers was up 30 per cent on a year ago to its highest level since the credit crunch in 2007. On Friday, the CML said buy to let lending topped £5.1 billion in the second quarter of the year, the highest since 2008.

And the DCLG published stats overnight showing that 10,000 people have registered for a help to buy equity loan in the last four months. Whether by coincidence or design, that was neatly calculated to capitalise on a housing market feel-good factor that was sent into overdrive by last week’s forward guidance from Bank of England governor Mark Carney that interest rates will stay at a record low until unemployment falls below 7 per cent (widely interpreted as meaning until 2016 at least).

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Own goal

As average asking prices pass £250,000 for the first time, two-thirds of the under-45s seem to have given up on the idea of ever owning a home.

Two surveys out today underline the point that what’s ‘good news’ for existing owners is exactly the opposite for people struggling to get on to the housing ladder.

Rightmove says that the market in the ‘under-priced’ (its word not mine) South East has ‘lifted off’ with asking prices rising by 14.8 per cent in the first six months of 2013 alone. However, the average increase across England and Wales is 10.4 per cent and the increase is even 5.8 per cent in the least buoyant region, the East Midlands.

If anything like that was repeated across the whole 12 months, 2013 would be appear to be set for a boom unlike anything seen since the credit crunch hit in 2007. True these are asking prices and prices actually achieved are still in the relative doldrums but they indicate that existing owners are reacting predictably to the start of Help to Buy by ramping up their demands.

Contrast that with another survey out today from the Halifax.

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Too close for comfort

Sir Mervyn King’s weekend criticism of Help to Buy leaves George Osborne looking more isolated than ever in his plan for government mortgage guarantees.

King steps down as governor of the Bank of England at the end of June but even so his comments on Murnaghan on Sky News on Sunday are quite a parting shot. Asked how the Bank of England would end a scheme of which it is the ultimate guarantor, he said that:

‘Well I’m sure that there is no place in the long run for a scheme of this kind, this scheme is a little too close for comfort to a general scheme to guarantee mortgages. We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis and we need to get back to that healthy mortgage market. We do not want what the United States have which is a government guaranteed mortgage market and they are desperately trying to find a way out of that position so we mustn’t let this scheme turn into a permanent scheme.’

Read the rest of this post on Inside Edge, my blog for Inside Housing