First-time buyer scheme in trouble
Wednesday 29th October 2008, 3:00PM GMT.
HUNDREDS of Islanders have been deterred from applying for a discounted home under the Jersey Homebuy scheme.
Following an investigation by the JEP, the States are now rethinking aspects of the scheme as prospective buyers say that it is too expensive to buy a three-bedroom house under the current guidelines. Members of the Housing department are urgently setting up meetings with mortgage lenders to agree a better deal for buyers.
And Environment Minister Freddie Cohen is requesting that Treasury Minister Terry Le Sueur exempts shared-equity buyers from paying stamp duty. According to potential buyers and lenders, the problems include banks demanding deposits which are ten per cent of the full cost of the home and not the discounted price, the stamp duty being a proportion of the full amount of the property and the strict limitations on salaries mean the repayments are too expensive for most qualifying people.
Many mortgage lenders say that they have been turning dozens of customers away and say the States have obviously not thought it through.
Pictured: Jersey Homebuy scheme houses are being built by Dandara at their Goose Green development
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The JEP should have mentioned the biggest cost to homebuyers… the fact that 20 means 20 will reduce mortgage relief to zero. The increase in tax for middle income earners this policy represents is far more significant than either stamp duty or the deposit when considering the entire life of the mortgage.
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These scheemes are only every designed to maintain high property prices and sell the unwanted Goose Green Marsh properties at inflated prices. I love Governments who support free-market pricing then artificially support high prices with such schemes.
Free-markets says if there is no-one available to buy the Goose Green Marsh 3 bedroom houses at £450,000 then the price will have to come down to make them sellerable!
Yes we all want to buy a house (I am local and rent because I cannot afford to buy) but I resent paying inflated prices and even moreso if the States are supporting the high market prices.
Prices will continue to spiral upwards with schemes like this and will only help line Developers’ (like Dandara) pockets (I have read estimates of £100,000 profit on a 3 Bedroom house).
So if we want affordable accommodation for all then we have to stop paying/subsidising inflated prices. There has been a drop in property prices the world over so why should Jersey be exempt from this? It is time the States looked after the people and not Business. Stop these schemes and allow the property prices to fall (or rise) naturally like the rest of the world!
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Again i must say ‘ I told you so’
When this scheme was introduced i predicted that any family on £40-60K per annum would not be able to afford these. What the States should be doing is building thier own propertys to supply to the poorer side of Jersey. Oh they do! its called Social Housing
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I am beginning to wonder where the Jersey property market will be in a few years time.
The estate agency signs are springing up thick and fast along the sides of the road and things are said to be quiet.
Maybe prices are not falling yet but the signs are staying up for a long time, that suggests to me that some vendors may start thinking of cutting the price to secure a sale before long.
Nobody has a clue how long or deep this recession will be or how it will affect the only major industry left.
I can see sensible purchasers hanging on to their deposits and seeing where the market is going in six months or so.
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What excellent news this is. The sooner the inevitable correction in the housing market comes the less long term pain the island, including first time buyers, will have to suffer.
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Spot on Paul. The house prices in Jersey are well and truely over inflated. It is time the Government stopped meddling with house prices.
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These government subsidies do nothing but ensure that Jersey will continue to have overpriced, sub-standard housing stock – and in actual fact, these are more like subsidies for developers as they allows them to sell homes at higher prices than they could otherwise.
It would be impossible (and foolish) for any government to support housing prices in the medium to long term (which is what this Jersey Homebuy scheme is doing). Prices are coming down naturally worldwide, and they will come down here too despite the futile and misguided efforts of the Jersey government.
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this scheme must succeed, we must find a way to prop up inflated house prices. and those who cant afford a house without an additional govt loan as well as a bank loan must be the ones to take the risk…
…inflated house prices in jersey must persist
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Subsidising new, so called affordable housing on the now shown, not so affordable, first time buyer ticket through tax payers money,ultimately benefits only the profits of developers. It is clear that Jersey politicians remain several steps behind the realisation of the stark facts of a global economic meltdown.It is time for hard decision and that must not preclude the reality that taxpayers should not be forced to subsidise an industry that has forgotten that profit involves risk.
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The States did not debate the shared equity scheme in detail, the proper process was deferred as Senator Cohen and Senator Le Main persuaded the house to trust them with the fine details of the scheme.
The issue did not go through scrutiny, one would have to look at Hansard to read the minuate of the debate, suffice it to say due process was over ridden by the Ministers in their haste to get these overpriced properties on a contentious site sold, for whose benefit one might ask!
For the benefit of young ‘qualified’ families, or in order to tick a box on the ministers list of performance objectives for the year, one might ask!
States members may be easily hoodwinked and cajoled into not adhering procedural correctness, however in the present economic climate I don’t think mortgage lenders will be as easily fooled!
Another blunder by another couple of Ministers, scrutiny has a purpose it is nout their as an irritant that can be brushed aside by a Minister, this debacle is proof of that!
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When they brought this shared equity scheme out it was if they the people behind it were frightened that house prices would go down. No 3 bedroom house is worth £500K in a place where the average wage is around £30K a year. They knew they could sell a lot of these flats so they opened the doors to outsiders.
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No surprises here. The problem in Jersey is the imbalance between property prices and income. Grow the economy (finance industry) and we have even more well off immigrants (non Jersey born) and economic migrants, be the migrants financial wiz kids or farm labours.
Problem Jersey is an island, so more people chasing an ever diminishing pool of land (estate) and what happens, prices go through the roof. Hence the demand for over crowed dos houses.
Our planning elite should buy a copy of SimCity and see how they do. You cannot subsidise housing without extra taxes. Robbing Peter to pay Paul is a recipe for the current for the current autocratic merry-go-round.
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At the sake of repeating some of my post from another thread …..
It can only be a matter of months before Jersey prices follow those in the UK, Ireland, Spain etc and crash massively as there will be no return to the cheap credit of the last seven years and a good thing to. The price of a home is simply what a willing buyer and seller agree and since most buyers need a mortgage and those will now require 10% deposits and sensible salary multiples then the price of property must fall. A home should first and foremost be a place to live and, if you want to, to raise a family not an investment priced out of the reach of large swathes of the public by greedy buy-to-let investors and property speculators. It is not the immigrant workers but the speculators that have driven up prices generally. No one on an average wage of c £40k can afford the average house at £480k. Rising property prices are quite simply a means of distributing money from young to old with only the very wealthy or those able to downsize and realise their profit benefiting.
Part of the reason Jersey properties have been bought up in such numbers as a good investment is because by having housing restrictions you artificially created a vast pool of people that can only rent. So if you are a wealthy Islander and/or nearing retirement and able to downsize and realise the vastly inflated value of your home what better place to invest it. A captive pool of renters who only need to be offered poor accommodation (where they going to go eh?). No capital gains tax and the ability to deduct your mortgage costs from your income unlike the owner occupier. Its a no brainer really.
STATES : If you want to help people in Jersey then tax capital gains on buy-to-let residential properties as income and / or cease to allow some or all mortgage costs on such properties as allowable expenses. Then prices would fall to match incomes.
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bring back price control,for most ordinary ,slightly below average wage familys with a mortgage, its more than likely the first and and the last home they will buy.
will we see applications for an extra bedroom and lounge built onto three bed houses as the parents still have their children still paying the mortgage off as these children will have children of their own ?
(train locals they want to stick around)
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Its all good wanting prices to go down but what about the poor mugs that will be left in negative equity, losing the hard earned deposits they put down to finally get a foot on the ladder. I dont see prices dropping much thuogh to be honest as we are a small island and there is only so much space available for the population which the government wants to grow till bursting point.
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I keep hearing people say it wont happen in Jersey. Head and Sand keep coming to mind time and time again. Note: If there is a rise in unemployment and costs there is less money to spend so thus you have more unemployment and even less money to spend…so on and so on. if this is the case, and only Christmas will tell, then the housing market will slow down and so this brings down prices. If i wanted to buy a house either for investment or to live in why should i buy now when mortage rates are at approx 6-7% or more when it is widely reported that the rates are to drop next year to a more affordable rate. By next year the housing market should be suffering really bad and i can go in and get a bargain. So Jersey will be effected and i will be ‘I told you so’ after Christmas when more shops are closing. On the subject discussed here i do not know one person who is going to benefit from the proposed scheme as £40-60K earners can not afford a £350K + mortgage if they have a family to feed already. Theres no more 100% mortgages as banks are requesting 70-90% deposits even on a discounted house you still have to find 10% deposit as the banks are mopre cautious than ever. This scheme should be scrapped and a proper investigation into helping working class familys onto the property ladder.
To add to this: The World Goverments have bailed the banks out from going bust and not to help you or me out. The public are still going to suffer worldwide like with the USA, they already have tent cities growing around the country. Next?
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I think a lot of people would like to see a price crash in Jersey. It needs a proper balance.
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Yes why should you buy now when rates are dropping, I completely agree but that does not mean prices are going to fall rapidly enough to pick up what I would term as a bargain. When was the last time prices significantly dropped in Jersey?
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The question of if the Jersey property market is going to fall is an interesting one and dependent on a lot of factors.
It is demonstrably slowing down in terms of transactions, banks are reporting lending a lot less money and stamp duty receipts have fallen. There is also a large amount of unsold property on the market, go round town and count the estate agent’s signs. There are dozens, a few years ago estate agents in Jersey barely bothered with signs.
What happens next is dependent on the world economy and decisions in the head offices of the banks and finance houses in Jersey.
Mild recession and things back to normal in a while might see the market stabilise or fall a bit.
Prolonged stagnation with serious retrenchment and job losses could see a major fall.
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