House Prices

HC Deb 04 March 1993 vol 220 cc438-9

3. Mr. Gerrard

To ask the Chancellor of the Exchequer if he will make a statement on current house prices in London and the south east.

The Financial Secretary to the Treasury (Mr. Stephen Dorrell)

I am pleased to say that recent developments are consistent with the view expressed by my right hon. Friend in the autumn statement that the housing market should start to recover this year.

Mr. Gerrard

Is the Minister aware that in east London three out of every five people who have bought houses in the past four years have a mortgage that is greater than the current price of their houses and that across Greater London nearly 40 per cent. of those who are in mortgage arrears have a mortgage that is at least £10,000 more than the value of their property? Does he accept that that is the inevitable result of a rundown economy with mass unemployment? When can householders expect to see sufficient recovery for their house values to be restored?

Mr. Dorrell

I recognise that at the end of 1992 there was a welcome decline in the rate of repossessions as a result of the action that the Government took at the end of 1991 to make it easier for people who encountered mortgage difficulties to stay in their houses. I welcome the words of Mr. Michael Jones, the president of the National Association of Estate Agents. Referring to a survey that that organisation had conducted, he said: There can be no doubt that recovery is now underway. I also welcome the fact that the chief executive of Bryant Homes said that, in his view, there was a strong pattern of recovery showing through. Those are things which I hoped Opposition Members would welcome.

Mr. Evennett

Will my hon. Friend confirm that mortgage rates are the lowest for a generation? That is a real achievement and one which should help house buyers in London and Greater London to deal with their problems. Does my hon. Friend agree that there were considerably fewer repossessions last year than in the past few years? Those are real achievements. We should start talking up the economy, not down.

Mr. Dorrell

My hon. Friend is absolutely right. He is especially right to draw attention to the benefits to the housing market that stem from the fact that mortgage rates are now at their lowest level for 25 years. They are not academic benefits. They are manifesting themselves in the sales of house builders in the first two months of this year, which are 20 per cent. up on the same period last year. The number of people viewing new houses on building sites is 15 per cent. up on the same period last year. I hope that those who are willing to look will welcome these signs of recovery.

Mr. Darling

Does the Minister accept that the signs of recovery are fragile and that one of the biggest obstacles to recovery in the housing market is unemployment and fear of unemployment, which is likely to subsist for some considerable time? Does he further accept that one of the problems in the housing market in London and the south-east of England is poor transport links? Can he confirm that crossrail and the other rail projects announced by the Chancellor in the autumn statement are to be axed?

Mr. Dorrell

The biggest threat to recovery in the housing market is the activities of those who appear to have a vested interest in continuing to talk down the housing market. There is clear evidence for those who are willing to look at the signs that the market is beginning to recover. I should have hoped that Opposition Front-Bench spokesmen would welcome that.

Mr. Ottaway

Does my hon. Friend agree that the mortgage interest rate has a large impact on house prices? There are many low-cost mortgages on the market, but is he aware that many building societies make it a condition of borrowing that the borrower takes out the lender's in-house insurance policy? That tends to be prohibitively expensive and distorts the advantage that may be gained by low interest rates. Will my hon. Friend investigate that practice?

Mr. Dorrell

My hon. Friend makes an important point and I share his commitment to ensuring that all aspects of the housing market work efficiently to the benefit of the consumer of housing—the owner-occupier.