Minister: Let us help you buy a home
Monday 19th December 2011, 2:59PM GMT.
Housing Minister Andrew Green
ISLANDERS will be offered help with house deposits and loan guarantees to get on the property ladder under new States plans.
Housing Minister Andrew Green has promised a major push in 2012 to help young people meet the astronomical cost of buying a home.
His five-pronged plan includes:
• States loans to help people pay for their mortgage deposits.
• An insurance scheme to increase lending rates from four-times to five-times salary.
• A review of the cost of building a house.
• A new discount Homebuy scheme.
• A new way to encourage couples to move out of family homes by buying ‘lifetime enjoyment’ of a smaller property.
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So the States are going to invest money in the form of loans for deposits and insure an insane five times salary multiple in an effort to prop up the moribund and overpriced Jersey housing market.
If it all goes pop, the taxpayer will pick up the bits.
Maybe Merkel and Sarkozy should try and tap them for a few bob to prop up the Euro.
“One way bet, can’t lose on this one Gov, £550M investment in Greek bonds from your Rainy Day Fund, you are a gent and no mistake.”
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States of Jersey: please stay out of the property market and let it find its natural equilibrium.
Prices are coming down (estate agents may not be advertising this) so why do you want to prop up and already inflated market (by my reckoning about 30% overpriced)? I have first hand experience of this.
The irony is of course that just today the UK are announcing that they are going to make it harder for people to borrow…
Unfortunately is no divine/human right to own 3 bed house in the country so just let the markets play it out. Save, buy a flat and move up the ladder in time – what’s the issue.
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I totally agree – it is not a divine right to own a three bedroom house in the country. In fact it is not a divine right to own anything without working you way up from the bottom.
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I completely agree. Let the market run its natural course, don’t distort and artificially inflate it.
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Of more benefit would be to stop speculators (Domestic and foreign) from buying up flats and house’s 10 at a time thus forcing up rents and inflating property prices which in the worst recession since the 30’s would fall far greater than they have in Jersey .
One only has to look to our neighbouring countries to see the markets adjusting property prices downwards to a much greater degree. One unfortunate consequence of course would be negative equity for many but overall if homes are to become affordable again for the average wage earner more control needs to be brought to bear on the rampant speculators, most of whom have got away without a penny in tax paid on the massive profits they have enjoyed.
Homes are for living in not a means for the wealthy to hide their loot from the UK Taxman.
What say you Mr Green?
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Why is it the folk of Mr Green’s generation just don’t seem to actually get what the problem is here – Andrew, the problem is not poor lending multiples or LTV values.
The problem is (and those invested in Buy to Let and the baby boomers will no doubt completely ignore this fact) house prices no longer have any relationship with earnings, or to dumb it down further – HOUSE PRICES ARE TOO HIGH!
Until the early 90′s the historical salary to house price ratio was 3. That meant that until 1990 or thereabouts you could buy a FAMILY home for the equivalent of the average salary of ONE person, not two.
Today following two decades of throwing money about by lenders that ratio sits at 14.5 using Jerseys latest published average house price and salary.
In 1990 a couple in their 20′s could buy a house suitable for starting a family for 3.5 times ONE of their salaries. Today most lenders will offer in the region of 4/4.5 times JOINT income. 3.5 x the current average salary would not even buy you a Spectrum apartment let alone something with sound proofing or enough room to swing a cat.
Not only does the minister want to increase that ratio even further by allowing couples to borrow up to 5 times joint salary – and by doing so further increasing prices (anyone with a vague level of intelligence can work out why increasing multiple would increase prices) he also wants to put tax payers money on the line guaranteeing the borrowing of reckless home owners who borrowed beyond their means.
I am approaching 30 and whilst i would love to have a family home and start a family i simply refuse to saddle my partner and i with a debt that by any metric your choose to use is secured against an investment that is in a) in a bubble and if you take the last years worth of UK land registry figures into account b) on the downside of that bubble.
Those heavily invested in BTL, the boomers who bought property to set themselves up with a pension and the lenders who gave them the money are all to blame for the stupidity that is the current housing market.
Unfortunately BTL owners, boomers and senior bankers are now those people who run the island and so we will not see the market corrected back to it’s historical average without action on the part of potential buyers (ie refusing to pay outrageous current prices).
Bring on the Crash i say. If you end up in negative equity, or when rates finally rise are unable to pay the mortgage then that is your fault for borrowing more money than your property was truly worth and/or borrowing beyond your means – you should not expect to be bailed out by the government.
My generation does not want to and will not pay for your overzealous borrowing, you lived the high live of cheap and easy credit – hopefully you will suffer the consequences.
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I think you figures of the past relate to the UK not Jersey, in my lifetime Jersey houses have never been 3.5 times one salary (unless that salary was very large).
Since the banking ‘boom’ houses have always been expensive in Jersey
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I completely agree .
The market has stagnated in Jersey for some time now. Too many over priced houses ( and greedy estate agents wh want to earn more for their 2% fee)!
The rest of Europe’s house prices have dropped Jersey in the eyes of the States seems immune from the global recession, in actual fact it’s not, With the highest ever unemployment in Jersey currently!
Because of the high cost of buying a house the rental value ends up reflecting this, so people are stuck in the position of being better off buying a house as rent is the same price or near enough of a mortgage. Because of this the island has lost such a huge percentage of its young people because they simply can’t afforf half a million pound mortgage for a 3 bed semi!!.
With an ageing population times will get much tougher for Jersey in the future if something isn’t done soon.
20 years ago the States gave a ‘States loan’ to people who wanted to buy a house this was set at around 10% and didn’t vary and as interest rates dropped the people who had these loans i.e people who were unable to obtain a mortgage from the banks were left paying 6-7 % more on their ‘States loan’ than people who had a regular mortgage. So the very people the scheme was set up for the less well off were actually far less well off on the scheme!
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Numb Butts (4)
Nicley put and so true
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Sounds like a strategy for disaster. What should be encouraged is for prices to be more realistic and people to work hard and save for their deposits.
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The following paragraph:
“Until the early 90′s the historical salary to house price ratio was 3. That meant that until 1990 or thereabouts you could buy a FAMILY home for the equivalent of the average salary of ONE person, not two.”
Should read
“Until the early 90′s the historical salary to house price ratio was 3. That meant that until 1990 or thereabouts you could buy a FAMILY home for the equivalent of 3 times the annual salary of ONE person, not two.”
Also any references to 3.5. should read 3, the actual figure is between 3 and 3.5 but has been rounded down
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Apologies, this reply was meant for my original post at #4
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It is rumoured that 25% will be wiped off of house prices next year – this is just the beginning, how much will be wiped off after then?
Why the hell would I want to buy a rabbit hatch here in Jersey, where quality is none existent, families are so crammed together anti social housing is created – this I though was a thing of the past.
And our ministers think we should by a flat and be grateful – maybe some of them should give up there family estate and live what they preach!
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So the States are going to prop up the overpriced property market, along with the £100 or £200 million per year overspend (depending upon who you believe).
The rainy day fund is not going to last very long – so are they going to start borrowing – because it worked so well for Greece, Spain ……..
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Property prices falling, and will continue to do so, deep recession looming, possible/probale “lost decade” of economic gloom and states want to use our (taxpayer) money to help those who cant get a mortgage on their own. 1) as said above there is no divine right for everyone to own their own home and 2) theres a reason these people cant get a mortgage!! What happened to the last lot of plonkers who lent money to people for houses who couldnt afford it – ah yes RBS, HBOS, Northern Rock. Great way to go States! This whole economic mess we are in, and will be for many years is because people live beyond their means and borrow money they cant afford to, so why oh why do our government want to continue with this?
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Two choices if Jersey housing starts dropping in value to prop up the prices.
Make it easier for the none quals. immigrants.
That has been done by the States, thinly disguised and hiding under the banner of fairness in an overcrowded island drop the qualies now eased.
Second move stop a natural correction of over pricing of property, by artificially propping up the market using tax payers hard earned money.
Not on Minister Green, this idea will benefit lawyers, banks and developers not the majority of islanders who trusted you to be a custodian of the public purse.
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Make it easier for the none quals. immigrants.
Agree. Lower the threshold for entry for those prepared to pay the 20 means 20.
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When you’re shopping quotes from lenders, beware of points that they’ll try to impose on your refi. Each point is a fee of 1% on the amount you borrow. I worked with 123 Refinance search online for them. I would strongly recommend them since they got me 3.24% rate on my mortgage refinance.
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Local renting tenants receive rent rebate (lost tax payers’ money), but assist them to get on the property ladder and tax payers’ money then is invested in property, keep the property market growing and on sale the money comes back to the tax payers’ coffers – also our sons and daughters working for suppliers of white goods, kitchens, flooring etc and as electrians, plumbers and decorators, accounts for such firms etc then pay good money into the shops that we work in etc – therefore as a taxpayer i would prefer to see my money in property rather than one landlords pocket
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But it won’t work like that.
The buyer will never sell the house because they will have to pay the States back 25% of the proceeds. This means they could only downgrade and people only ever downgrade to pocket the difference in cash for their sunset years. Who in their right mind would downgrade if they weren’t going to benefit from it financially?
It would be interesting to know if the purchasers could will it to their heirs. I suspect that if they did that the heirs would have to pay 25% of the market price meaning the heirs are now going to need housing and this charade starts all over. In other words the tax payer are highly unlikely to realise their 25% investment.
This is flawed economics for a vote winner.
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Numb Nutts, sounds like you are bitter and want to buy a home but can’t afford it. Either that or you are waiting for the alleged crash. I bought a house 10 years ago, saved hard for 7 years to buy it, just tied into another 5 years fixed rate at 3.4% £280 less than the previous mortgage monthly payment.
It’s costing me £1600 a month to buy a good sized 3 double bedroom house, off road parking for 6 cars and a 60 foot garden.
I rent out the spare room for £600 a month so it costs me £1000 to buy a house which at todays prices is worth £500K give or take. You can’t rent a decent 2 bed flat for £1000 a month, plus my asset will continue to gain value long term and eventually I’ll be mortgage free owning the asset.
So if you can make the mortgage payments why on earth would you rent? because you are a bitter individual who lacks the skill or committment to buy their own home and resents those that posess this ability.
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You couldn’t have assumed further from the truth.
As it goes i can well afford to buy; i earn significantly more than the mean average salary and am in a comparitvely secure proffesion but choose not to saddle myself with such a large debt when all current pointers indicate i would be loosing money by buying almost instantly – y’know that little thing known as ‘negative equity’.
I rent a very nice house for a very reasonable price (less than i would be paying on mortgage) and am more than happy to keep doing so until prices correct themselves to a level that vaguely resembles sensible.
Im not sure how you came to the conclusion that i am either a) bitter or b) lacking in skill or commitment to buy especially given that i have owned property in Jersey. I owned before i was even 20 infact however I just chose to get out whilst the going was good.
I am perfectly capable of buying, have a perfect credit rating and a deposit. Clearly you can’t comprehend the fact i choose not to.
Rather tellingly you say (and i quote) “I rent out the spare room for £600 a month so it costs me £1000 to buy a house which at todays prices is worth £500K give or take”
Perhaps the most pertinent word in that paragraph is ‘today’. Sure, your house might be worth £500k today, what happens when the inevitable happens (as is currently happening across most of the rest of the developed world) and suddenly your house is worth £350k, £300k or as is likely even less??
Yes that’s right – you’ll finally twig that actually you’ve been doing nothing but flushing money down the toilet for the last 10 years.
I don’t resent those who choose to own, if anything i pity anyone who bought in the last 10 years as they have ultimately bought property at peak prices. Clearly it is you who is bitter – I beleive in the typical ‘bubble’ cycle your response is what characterises the ‘anger’ phase – enjoy your negative equity my friend.
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And then the cycle will begin again…..
If your in it for short term financial gain, property is not for you, If you in it to have somewhere to live and a long term investment, whoo hoo, doesn’t really matter when you bought, as once the mortgage is paid off, you don’t have to pay for it anymore, and well it’s value to you, is.. It’s free to live in, unlike spending 60yrs renting!
I could post figures, but I feel the time would be wasted!
Enjoy your life of forever renting, and having no nest egg or inheritance to hand down.
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You’ve rather missed the point…
Your first line suggests you understand the concept that there is a property bubble or cycle so you clearly have better understanding than the original poster.
I intend to buy at the bottom of that cycle – it’s as simple as that. Why would i want to pay the peak prices of 2007/2008 when i can wait a few years, bank the cash i am saving on renting (ie not paying fonciers rates nor paying to maintain a property etc) and pay a far lower price?
There seems to be this misconception that renting is somehow inferior to owning, im not entirely sure why given im actually saving the extra cash a mortgage would cost (and investing it in vehicles that mean that that cash is not subject to inflationary loss), not to mention loosing money on a property (it was estimated that on average UK property was loosing £1000 a month this year).
You have ASSUMED your property will be worth a similar amount to that which you paid in order to provide some inheritance for your kids. I have GUARANTEED i will have a similar amount in pure cash. Which of us is the more sensible?
I don’t mind owners looking down on me as a renter as actually pity most owners, especially those ignorant condescending ones who swallowed up the whole ‘property can only ever make money’ line.
At least i am solvent, debt free and mobile – if even half of the nasty stuff going on in the world at the moment comes to fruition i will at least have a fighting chance at making the most of it – most homeowners will be stuck with huge debt and property that they cannot sell. I know which boat i’d rather be in.
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just checking….are you declaring and paying tax on the £600 per month you are charging the lodger?
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Bitter Ann Twisted, you have made a very good arguement for why house prices are artificially high compared to salaries and why it would be a bad thing for the States to try and prop up the housing market.
Like many in Jersey you can’t really afford the mortgage for your property. You make it work by renting out a spare room at squeekingly high rates that our housing qualification rules allow you to do so more than likely to some poor non-qualified. The percentage of people who have to do that to afford their mortgage is very high compared to the UK. Its not normal housing market over here is it? One sustained by unusual practices and exploitation of our housing rules on those coming over here.
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Another positive move by the new CoM. Well done!
My initial reaction or reading the headline was “Oh no, not another attempt by the States to subsidise the housing market!”, but no, Andrew Green appears to made the first credible attempt to solve an intractable problem.
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Taken straight from the manifesto of that sensible Mr Le Clercq who stood in St.Ouen recently
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States help is a mistake. If property is not selling it is to expensive. If their is not enough housing build more social housing keep the rent low to keep pressure on profiteering from developers. We Need to understand a home is not an asset for speculation.
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The last thing Jersey needs is more social housing, one you put the immigrants in they never leave – hence our ‘ageing population’.
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Good to see a five point plan which provides some interesting ideas. However if I step back from this and look at the intent to manage Jersey’s population why would we want to use taxpayer’s money on three of the five points ? A reduction in demand will surely have the desired impact on house prices. Also please do not consider another Homebuy scheme unless you have both the legal and operational framework in which to deliver it fairly and at no cost to the taxpayer.
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Gino Risoli – States help is a mistake. If property is not selling it is to expensive. If their is not enough housing build more social housing keep the rent low to keep pressure on profiteering from developers. We Need to understand a home is not an asset for speculation.
To expensive, surely you mean too expensive,if their is not enough housing – If there is not enough housing…
Didn’t you stand in the recent elections, I can’t think why you didn’t get elected, there, their, they’re better luck next time.
A home is not an asset for speculation, I beg to differ if I choose to buy one with my money it can serve any purpose I choose providing it does not contravene the law.
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“A home is not an asset for speculation, I beg to differ if I choose to buy one with my money it can serve any purpose I choose providing it does not contravene the law.”
Perhaps the point is that for 99% of buyers it is NOT their money, it is the lenders.
There is a common thought that property is an investment that is expected to earn you money and that is precisely the problem with the current housing market.
Leaving aside the question of whether expecting an investment bought with someone elses money to earn you money is even moral/ethical, purchasing a property should be to provide a home not done with the aim of setting ones self up with a nice little lump sum upon it’s sale.
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Not true the bank can use your money in your bank account (along with others) which they give you a pittance of a return on to give it to people like you who may be buying a house at a grossly inflated percentage rate helping them maximise their profits which enables shareholders and top bankers to have big payouts. Capitalism is great isn’t it?
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Your spelling may be better than Gino’s but your grammar stinks.
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Oh dear, I see that small selection of dull and boring posters are creeping back onto these forums to comment on spelling and grammar again.
It’s been really nice these past few months reading (mostly) relevant, factual and sometimes heated debates.
People who just come here to correct spelling should buzz off and get a life!
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I am unhappy for us to be subsidising house purchases whilst cutting back on education subsidy. This is just moving the money around, please don’t raise the money by borrowing either that is another disaster waiting to happen.
All the reviews are a good idea but any unnatural market pressures on an already unpredictable and fragile market is a risk too far for any public money.
When the prices were going up the public were told we had to bow to market pressure, well when the markets are falling the developers have to bow to market pressure.
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Numb Butts, you are gambling that prices are going to go through the floor, in a market with limited housing stock this may not be so. Why are Dandara continuing to build more homes, they are well informed and not in the business of losing money. Perhaps they have assurances that something fundamental is going to change, quals drop or remove.
Prices may drop, they may remain static, they may go up, 10 years in I will not be facing negative equity, I will continue to invest in my home which in 10 years time will be owned outright. You will continue to throw money away on renting a property that does not belong to you and in which you are restricted by the laws of your tenancy agreement.
Long term property never loses money, I’m in for the long haul, I don’t care if prices drop £100K I’ve still made money and continue to live in a property I own for less that I would pay for a half decent flat, you are doubtless paying more to rent than I am to own, I’ve disclosed figures you have not.
Hope all that money of yours is invested in a safe place, a house is more stable than a bank or stock option.
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This is good news for developers as the taxpayer subsidy will help increase demand and keep first time buyer homes around £450,000. Without this injection into the market prices would probably fall by 20% to around £360,000. None of the sub-prime lessons have been learnt by this stupid idea. There was an old saying that Jersey house prices only go up – in fact they will only go down in future. Those that purchased shared equity, and those encouraged to gear up with government assistance, will live to regret their decision. Leave the market alone – let prices fall to realistic levels – and stop supporting the developers.
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So who should I be listening too? Numb Butts or Bitter Ann Twisted?
When I was just a toddler, my father was the breadwinner of the family. My mum stayed home with me. He was on a normal salary, we were not poor, but we dod not go on holidays either. My father used his salary to pay for a 4 bedroom house with garden and parking which is worth £750,000 + today.
My partner and I both work and yet we can not afford more than a two bedroom flat and we earn on avergae more that the equivalent of what my dad was earning in his day.
I think this shows that life in Jersey over the last 30 years has become rediculously expensive.
I hate renting but I’m too scared to buy as worried I’ll never sell the place and if I do it will be at a reduced price.
What to do???????
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I hate renting but I’m too scared to buy as worried I’ll never sell the place and if I do it will be at a reduced price.
What to do???????
Wait it out and see what the market is doing, one things for sure interest rates aren’t going up anytime soon. I’m not selling because I love my home and I love the freedom of owning it and not having to comply with a landlords wishes. If you buy now you may lose money short term, are you in for the long haul, are you risk averse, no one knows what is going to happen, they never have although it is more uncertain at present. If the Euro doesn’t crash followed by the American economy then global collapse and world war 3 I’d be looking at buying.
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I’m pleased to see the general consensus that this should be a non-starter.
I know a young lady who has a sizeable deposit and has been looking to buy for some time, as others have said the property prices are out of the reach of most buyers.
I think for a lot of local youngsters the demand is not so much for a three bed house with a garden (although some do feel they are owed) but more for a home in the parish they grew up in. Unless that parish is St Helier they are doomed as there are few first time buyer schemes built outside Cohen’s Capital Collective these days.
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My advice steer well clear unless already on the property ladder then the risk is limited.
First time buyers will be left high and dry in negative equity when things get worse as, they will, looking at most economic indicators.
The EU looks like it will take a tumble and this will have dramatic repercussions for Jersey. I predict a large rise in layoffs locally including the banking sector. Only a few will be able to survive if they lose their job as too many are too highly geared and they will be forced to offload their property sustaining a financial hit. Quite a few I would bet will want to leave Jersey for safer climes but negative equity will be a millstone around their necks.
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I agree, people who own their property outright will be OK, but I do feel sorry for those with 100% mortgages who cannot sell expect for a loss even currently.
Everyone knows people who have lost their jobs, including well paid jobs. I can think of at least 6 people in various types of employment who are worried if they will still have jobs in 2012.
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It always amazes me when people say “I bought this house for £300k and it only costs me £1,200 per month for the mortgage.
If you do the maths you’re probably paying over £500k for your £300k house if you stay there until your 25 or 30 years of payments are complete.
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