EC recommends reforms to housing market
The European Commission (EC) has advised the government to consider reforming the Help to Buy scheme, building more houses and raising more council tax on higher value properties.These reforms could be needed in order to address the issue of distortions in the housing market, the EC said, noting that the supply of homes has not risen sufficiently to keep pace with growing demand.As the property tax payroll has not been updated since 1991, increasing property values are not translated into higher property taxes, the EC stated. This means that in relative terms the taxes on higher value properties are lower than on lower value properties.The EC points out that the undersupply of homes is likely to continue to be a problem in the medium term and incentives are recommended to raise the supply at a local level.If necessary, it says the Help to Buy 2 scheme should be adjusted as part of measures to ensure the property market does not overheat. This may be particularly necessary in areas such as London.The measures form part of a number of recommendations set out for EU member countries aimed at boosting growth, enabling job creation and maintaining competitiveness.President Jose Manuel Barroso said: "This is about helping member states firmly out of the crisis and back to growth."In its analysis of the UK's attempts to eliminate the budget deficit, the EC says efforts have hitherto focused on cutting expenditure and more could be done to broaden the tax base, particularly by increasing indirect taxes.High levels of mortgage debt are identified as a risk factor which could lead to macroeconomic imbalances.A government source commented: "Figures last week showed Help to Buy has helped thousands of first time buyers on steady incomes buy properties and finally realise the dream of home ownership. Its an aspirational policy that will remain a key part of our economic plan."However, the spokesman added that it is right to remain vigilant and the Bank of England has been given powers to intervene in the housing market if it sees fit to do so.
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