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The Royal Institution of Chartered Surveyors (RICS) have delivered a stinging attack on the coalition Government’s NewBuy mortgage scheme, suggesting it could wreck the entire housing market.

RICS are also calling for the regulation of all letting and property management agents, and the introduction of a single, UK regulation and redress scheme to be set up within 3 years.

The RICS says that NewBuy, which offers purchasers of new-build property 95% mortgages underwritten by taxpayers and developers, could reduce demand for ‘second-hand’ property and play havoc with lenders’ affordability calculations.

The RICS says that the NewBuy scheme may not even help first-time buyers when they come to buy second-hand properties because without stimulating the second-hand market as well as new-build, purchasing chains and overall transaction levels will begin to stagnate.

The institute is to include specific guidance to the valuers of new homes, to ensure that they understand the impact of NewBuy and make sure it ‘does not adversely impact the market’.

But while the RICS is calling on the Government to help local authorities introduce more Lend a Hand schemes, where buyers put down deposits of at least 5% and local authorities provide an indemnity of up to 20%, the organisation says the ‘dire state’ of local government finances makes this unlikely.

The RICS are also calling on the Government to amend the Estate Agents Act to bring all property letting and management agents within its scope, in terms of the need to have client money protection professional indemnity insurance and redress mechanisms.

The RICS says it will work with other bodies to establish by 2015 a single industry-wide regulation and independent redress scheme for the whole sector.

It also wants to see the Government encourage more investment in the private rented sector, including encouragement of ‘build to rent’ schemes, and for private tenants to be offered longer tenancies.

Elsewhere in its new housing policy, the RICS calls for VAT on all home repair, maintenance and improvement work to be cut to 5%, and for Stamp Duty to be reformed.

The RICS produced its new housing policy after consulting its members and will now lobby the Government.

Peter Bolton King, RICS global residential director, said: “To deliver real influence in the corridors of power, RICS needs to have clear residential policy. In putting this landmark work together, we met with our members and firms of all sizes from right across the country. What came across loud and clear is the desperate need to reform sections of the market and generate growth right across the UK. We will now take these recommendations to the Government with the aim of helping them to improve the residential property sector for those operating within the industry and the public as a whole. Change needs to happen if we are to see an economically viable and professionally driven residential sector, and I stand ready to work with members, government, other industry bodies and consumer organisations to achieve this.”

Sales of homes may rise a little over the coming year but prices will struggle to follow suit, according to the RICS Housing Market Forecast published on 22nd December 2011.

Prices at a headline level will edge lower by around 3% across the UK. However, the low level of supply should continue into the coming year, stabilising prices and preventing significant declines.

Transaction levels are likely to see a slight resurgence next year and climb back to around 880,000, roughly the level of activity recorded in 2010. However, to put this in context, total sales in 2006 were almost double this amount at 1.67 million.

The weak economic picture anticipated for the next six months, along with the prospect of increased unemployment, means that demand to purchase property is unlikely to see any significant increase and will remain relatively flat. While the government’s recently announced mortgage indemnity scheme is designed to help up to 100,000 buyers on to the property ladder, this is likely to have limited impact as it is restricted purely to new-build properties.

Meanwhile, despite the prospect of growing unemployment, repossessions will see only a very marginal increase in 2012. The number of repossessions for this year is likely to be around 35,000 and, although next year’s figure may be slightly higher, the total number of properties taken into possession over the next 12 months should not exceed 40,000.

Elsewhere, the residential lettings market will continue to perform well in 2012. Demand for rental properties remained strong throughout 2011, as many first-time buyers were unable to access the sales market. This looks set to continue over the coming 12 months. However, the gap between demand and supply is shrinking, suggesting that the increase in rental values may begin to slow as the year wears on.

Simon Rubinsohn, RICS Chief Economist said: “The general economic climate is likely to be the biggest influence on the residential property market next year. Prices could edge a little lower as unemployment continues to rise. However, the lack of supply in the market is likely to prevent any significant house price declines.Transaction levels should see a slight increase, although mortgage lending is likely to remain subdued which will limit the scope for improvement. As a result of this, the lettings market will remain firm, which means that rents are likely to increase further, albeit at a slower pace than in 2011”.

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