The UK general election is only weeks away and parties are fighting for your attention and your votes. The Liberal Democrats are the latest to tap into the UK property market with a so called “rent to own” property scheme. This new policy is innovative and creative but already it seems to be falling apart at the seams with experts highly critical of the move.
What does the scheme offer?
In simple terms the Liberal Democrats are promising to build 30,000 new homes in tandem with housing associations by 2020. The idea is that those who are not able to climb aboard the property ladder, perhaps unable to put together a suitable deposit, will be able to rent property at the relevant market rate. After 30 years of renting the “tenant” will receive full ownership of the property having effectively paid for it during their tenure.
While this is a very different approach to problems for first-time buyers it is innovative if nothing else. The detail also seems to suggest that each monthly rental payment would equate to an increase in the tenant’s share of the property from day one. There is even a suggestion that some first-time buyers in the future could cash in their “share of the property” and use this as a deposit on an alternative home.
Why is the scheme being criticised?
The way that the UK property market is moving at the moment it is more expensive to rent than it is to take out a mortgage, assuming you have the finances available, therefore in theory you will be paying more for your property. In what has proved to be yet another difficult situation for political parties looking to do right by first-time buyers, critics suggest that only those on relatively high incomes could afford a market rent. This is before we even begin to look at the number of properties proposed!
While the introduction of 30,000 new rent to own the properties is certainly a step in the right direction it is but a dot on the landscape of the UK property market. Millions of people in the UK are struggling to even scrape together enough for a deposit let alone qualify for a mortgage. So, while in theory the idea of assisting first-time buyers in any shape or form is welcomed it does not look as though this proposal by the Liberal Democrats stands up to close scrutiny.
How can governments help first-time buyers?
Despite all of the hot air from politicians across the full range of parties there is very little that they can do to assist first-time buyers in the short to medium term. The only real way to assist first-time buyers would be to significantly boost the number of new properties built across the UK each year. However, this in itself would spread the demand for UK property across a broader spectrum and therefore potentially impact growth in property prices.
Until we see a major change in either the way the mortgage market is financed or a reduction in UK property prices, to more affordable levels for first-time buyers, this situation can only get worse. Politicians may mean well with proposals for first-time buyers but why is it that we only hear of these moves just prior to an election?