The First Homes scheme will price the home 30% below market value which will remain with the home for new first time buyers in the future
Following the manifesto promises about reducing the price of a new home, Housing Secretary, Robert Jenrick, has announced a First Homes Discount which will cut the cost of some new homes, which will benefit UK first time buyers.
The First Homes scheme will price the home 30% below market value. This discount will remain with the home so that it can then be passed on to new UK first time buyers in the future.
It is hoped that discounted homes will help local people buy in traditionally expensive areas they grew up in that they may otherwise be unable to buy in.
The scheme will mean deposit and mortgage requirements will be lowered, making home ownership more realistic for a lot more buyers.
The average home in England currently priced at £314,000 would become £94,000 cheaper under the First Home scheme with £18,000 being taken off the average 20% deposit expectation.
Whilst the scheme will undoubtedly help more people gain a foothold on the property ladder, what happens when the first generation of homeowners look to sell their home but face a 30% market value reduction.
First-time buyers are the most dominant demographic in the market, making up 51% of all transaction last year according to Halifax.
Furthermore, over the last five years, home ownership amongst those aged between 25 and 34 has increased from 36% to 41%.
There could be a fear that second steppers quickly become disadvantaged and unable to move because their first home is priced so far below the new home they would like to purchase, especially if stamp duty land tax also becomes a consideration.
As the government look to help those unable to purchase their first home, they will also need to consider how they will help second steppers.
Housing Secretary Rt Hon Robert Jenrick MP said, first Homes will be life-changing for people all over the country looking to buy their first home.
He said, I know that many who are seeking to buy their own home in their local areas have been forced out due to rising prices. A proportion of new homes will be made available at a 30% market discount rate – turning the dial on the dream of home ownership. The discount will be passed on with the sale of the property to future first-time buyers, helping thousands more people in years to come and ensuring local communities can stick together.
Paula Higgins, Chief Executive of the Homeowners Alliance, said, we know that first-time buyers will welcome the opportunity to buy a good quality home at a discount in their local area.
We look forward to contributing to the consultation and working with the government to ensure that the scheme does what it says on the tin – more high quality and affordable local homes for current and future first-time buyers, Higgins said.