Moneyweeks Blog reports:

George Osborne announced a new scheme to help out buyers having trouble getting their hands on deposits and hence houses. Under the Firstbuy direct scheme you have to save up a 5% deposit. Then the government and a housebuilder will both put up another 10% for you, via an equity loan on a very low interest rate. That gives you a total of 25% – enough to make sure you can get a well-priced mortgage. According to various employees of estate agency Kinleigh, Folkard & Hayward this is “great news” for property companies and “great news” for first time buyers.

I’ll go with the first – any buyer is a good buyer for a house builder these days. But the second? No. House prices are too high and they will come down – in real terms at the very, very least. So it doesn’t make any sense for the young to buy them now. They are much better off saving and waiting regardless of the various bribes chucked out by interested parties.

So why should the budget be making them happy? Because it has at a stroke made investing in what they really need – good quality rental portfolios – a much more attractive thing for big investors to do. Until now, if investors have bought groups of flats, they had to pay stamp duty as one tax on the lot. So if they bought five £200,000 flats together they had to pay 5% of the purchase price away – £50,000. That was pretty off putting.

Now they won’t have to do that any more. Instead they will pay stamp duty based on the median value of the properties in the portfolio, so 1% (the rate on properties that cost below £250,000) or £10,000. That makes a big difference – to them because it makes investing more likely to give them the yields they need, and to non-home owners because it means they will end up with more choice in the rental market.

Right now the rental sector in the UK is dominated by buy-to-let investors. This isn’t good enough. Some buy-to-let landlords are great. Some are awful. But most suffer from lack of scale one way or another (they don’t have full-time handymen at their beck and call) and from cash-flow problems: when the purchase of a new boiler requires several months’ worth of rent to be set aside and there is a mortgage to be paid, not very many tenants get new boilers. That’s why 40% of the privately rented property in the UK is considered substandard.

However that aside, the buy-to-let sector just can’t provide for the fast-rising number of people needing quality rental property in the UK; they aren’t big enough and they can’t get the finance to ever be big enough. For that we need institutional investors. Cutting their stamp duty bills is a good way to start luring them in.

Postive news in the Independant,houses are selling quicker.The Independant says:

The asking price of an average home climbed £58 a day in the last month, an jump of 0.8 per cent to £231,790.

But owners of terraced homes are being squeezed out of the market as first-time buyers are unable to move because of high deposits demanded by lenders. The March Rightmove House Price Index shows that asking prices have risen 0.9 per cent over the past 12 months.

Miles Shipside, a director of Rightmove, said: “The falling time on the market and stable spring stock levels would normally point to a healthy housing market. However, this year’s celebrations will be severely muted by the knots the market has found itself tied up in.”

He added: “The market is still restrained by low transaction volumes and restricted liquidity.” However, in a positive sign, the average time a property is on the market reduced to 89 days, from 98, in the month to 12 March.

But the housing market is now being driven by the need for larger deposits, leading to greater liquidity for more expensive property types, which appeal to a wealthier demographic. Meanwhile, first-time buyers and sellers of terraced homes are struggling. The property website says the number of terraced properties coming on to the market is down by almost a third – 31 per cent – since March 2007.

“Terraces’ target audience of would-be first-time buyers are stuck in rented accommodation, with 30 per cent of them in our recent survey expecting to stay there for three years or more,” Mr Shipside said.