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Will the Property Market Bounce Back in 2012?

Will the Property Market Bounce Back in 2012?

The question on many people’s minds is how will the property market fare in 2012? Homeowners with mortgages are likely to want a different answer than those struggling to get on to the property ladder.

Of course, the British property market isn’t one size fits all. There are huge regional variations on how the market is performing which makes it difficult to give a clear picture for the whole country. In addition, the top end of the market seems unaffected by the economic crisis with the very rich seemingly unaffected by the financial uncertainty most of us are feeling.

Why Prices Might Not Rise

In 2012 access to mortgages seems set to remain more restricted than the heyday of almost limitless lending. Even with the base rate remaining at 0.5% for an unprecedented period of time, the cost of mortgages is predicted to increase due to the ongoing Eurozone crisis, so anyone seeking to re-mortgage or move home will face higher rates. This could dampen property prices.

Another factor that could keep a lid on prices is the Chancellor’s decision, announced in his Autumn Statement, not to extend an exemption on stamp duty for first-time buyers. At the present time, stamp duty is charged at 1% on properties from £125,000 to £250,000 but first-time buyers don’t have to pay. From 24th March 2012 the scheme will end, as had originally been planned. Those hoping it would be continued will be disappointed and it could stifle demand at the lower end of the market.

Moves To Help the Market

Better news came in the form of a mortgage indemnity scheme that aims to help 100,000 people. It will work by enabling first-time buyers to take on mortgages of 95% of the value of a newly built home, allowing them to provide a deposit of only 5%. This compares favorably to the current average deposit of 17% and the 20% deposit that banks demand from buyers seeking their first mortgages. The plan should also help the beleaguered house building industry.

See Also

Another plan to stimulate flagging property sales is a £400m scheme to kick-start stalled house building projects in England. It hopes to lead to the building of 16,000 new homes. In addition a Government initiative expects 170,000 new affordable homes will be built by 2015, which should help many people have a place to call their own for the first time.

Whether the combination of these factors will be enough to revive the housing market in 2012 and beyond remains to be seen. Of course, whilst the rising cost of property is seen as a positive indicator of the state of a country’s economy, for many people a drop in prices could be an opportunity to buy. For people saving for a deposit, who are paying high rents and keen to get on to the housing ladder, a correction in prices would be seen as a good thing as it would make buying a property more affordable.

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