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Bring back the 100% mortgage or risk big city brain drain

Scrap stamp duty for first time buyers and bring back 100 per cent mortgages. Those are the radical proposals from one of Britain’s leading estate agents for solving the housing crisis.

Paul Smith, owner and chief executive of Haart, the UK’s biggest independent estate agent, warns that London will see a brain drain of young workers without drastic action. 

Politicians are too concerned about the amount of tax they can collect, he argues, and he takes a very dim view of the stamp duty increases introduced by George Osborne in April 2016.

Paul Smith, owner and chief executive of Haart, the UK’s biggest independent estate agent, warns that London will see a brain drain of young workers without drastic action

‘The Government is not listening because it has become so dependent on the income from stamp duty,’ he says, calling not just for the scrapping of the tax for first-time buyers, but for cuts in stamp duty across the board.

‘Home ownership is at a 30-year low and the market has slowed significantly since the Government’s stamp duty reforms were introduced. The next Budget is the right time to look again at this tax and tackle our home ownership crisis.

‘First-time buyers should not have to pay anything. They are already trying to build up a large deposit. It is simply unfair to force people to this when they are trying to get on the housing ladder.’

Smith quit a career as a press photographer, highlights of which included snapping Prince Charles just before his marriage to Lady Diana was announced.

He says: ‘I photographed Prince Charles walking his labrador Harvey outside Sandringham. I asked him if there was going to be an imminent statement on his engagement to the then Lady Diana Spencer. His reply? ‘In the morning.’ My photos were on the front page of four national newspapers.’

He quit the press after spotting a niche. He says: ‘All I knew was the typical estate agent didn’t take a very good photograph. I thought – I can change this and revolutionise this, let’s have a go.’

With his father Alick he took over a small estate agency in Colchester in 1989, from which he built a national network with offices from Plymouth to Doncaster.

As well as the Haart name, it owns a number of other estate agent brands such as Chewton Rose and Felicity J Lord. At any moment the group has 20,000 properties on its books worth about £3 billion.

It’s a small share of the market, but Haart still reckons it is the fourth biggest chain in Britain. He is looking at more acquisitions which would take his business further into the North of England.

Smith, 57, has a typical story of house buying for his generation. He says: ‘My first house cost me £18,250. We had to spend a bit more to renovate the place. Thereafter I moved every three years to get up the ladder until I hit a typical four-bedroom executive home, which I stayed in for many years.’

He now lives on the Essex coast, still close to the Colchester headquarters of the business. But while his desire for reform of stamp duty is radical, his call for bigger mortgages may be equally alarming for those concerned about rising borrowing and the risk of a bubble – not least financial regulators.

While it is possible for banks to lend such amounts, tougher scrutiny from regulators since the crisis means such offers have all but disappeared. On the tenth anniversary of the start of the financial crisis, Smith’s call for 100 per cent home loans seems like a return to the bad old days.

But Smith insists there is no comparison, saying: ‘That was caused by sub-prime lending and 125 per cent loan-to-value mortgages. That was reckless lending. But if you have people who have been paying rent for years then why should they have to find a big deposit?

‘Deposits on 95 per cent mortgages on the average home are about £14,000 and £25,000 in London. Where are first-time buyers supposed to get that money when rents are so high? We’re in danger of seeing the Millennial generation leave London in a mass exodus, causing a brain drain out of the capital as they move away to fulfil their desire to own their own home,’ he declares. 

He argues that with a high loan-to-value mortgage, young people will typically be under less financial pressure than if they were paying those high rents.

‘Would-be first-time buyers are trapped. Rents are too high nationwide and in London they are 41 per cent higher than in the rest of the country. Hundred per cent mortgages should be available to those who have a successful track record of paying such rents.

‘If you take a property worth £200,000, that may cost about £900 a month in rent. On a 95 per cent mortgage and assuming a 3.58 per cent interest rate the repayments would be about £800 a month.

‘It’s about responsible lending to those with a proven ability to pay rent, but who lack of equity due to their housing situation.’

While Smith’s suggestions are radical, he insists he is not panicking about the housing market. The latest research from the Royal Institution of Chartered Surveyors published last week shows house prices stagnating nationwide.

Smith, however, is cautiously optimistic. He says: ‘I’m hoping we’re at the bottom of the barrel, but no-one has a crystal ball. Who saw a snap Election coming?

‘The question is how long we are going to stay at the bottom before we start the inevitable climb out of the hole. The Autumn Budget could be a turning point,’ he says, returning to his bugbear of stamp duty.

Can he really be so sanguine, when house prices in many parts of London are falling? He says Brexit is largely to blame, but will prove a passing effect. He says: ‘You used to have the whole of Europe and Asia wanting to invest in London property. Now they are not so sure because of the uncertainty about Brexit. I think that will be short-lived. We are still a stable country, so I see them coming back.’

Smith’s demands for tax cuts on property sales and his optimism – albeit guarded – will be dismissed by some as typically self-serving of an estate agent. But in another regard Smith is trying to challenge stereotypical behaviour in his industry, which he agrees still has plenty of rogues and needs regulation.

‘I have been lobbying MPs for the past ten years to introduce licensing. We are the only developed country in the world that does not licence estate agents.

‘You could walk out of prison and set up as an estate agent,’ he quips. Then he adds with a laugh: ‘Most of your readers will probably say that happens anyway.’

So Smith has a clear sense of the public’s cynical view of estate agents. But it could be worse – he could still be in newspapers. 


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