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UK government puts aside £388 million for housing projects

The UK government has today confirmed that £388 million has been put aside to provide funding to 115 private sector housing projects in England. The "Kickstart scheme" has begun with a £62 million payment to an array of private sector developers who had been caught short by the recession and were forced to mothball some of their developments. So what does this mean for the industry?

If you read the headlines you may be forgiven for assuming that the £388 million is a "giveaway" to the building sector when in fact two thirds of the developers have been told to repay the money in full and a significant number have reached individual agreements with the government. All in all it seems that this giveaway is not really a giveaway and is in fact a taxpayer funded loan to increase the number of houses in the UK at a time when the housing market itself is still under pressure.

There is concern that the introduction of new homes to the market could well reduce competition and slow down the recovery in UK property prices. It would appear that the UK government is more interested in keeping employment numbers as high as possible in UK property sector, possibly at the expense of property prices across the UK. How these companies will be able to afford to pay back substantial government "loans" in the short to medium term is anybody's guess.

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