By reducing deposit requirements to just 5%, Help to Buy has removed one of the main barriers to getting on the housing ladder.
Indeed, since it started in 2013 the scheme has supported 31.4% of all new home sales nationwide – with 72,000 sales a year for the last three years. But with less than 12 months to go until it ends, what are the alternatives for buyers?
First Homes
The government’s flagship policy to replace Help to Buy, First Homes are now a material consideration in all planning applications.
Eligible properties will be sold at a price of between 30 and 50% below market value – a discount that remains in perpetuity. The maximum value of a First Home, before the discount is applied, is £250,000 (or £420,000 in London).
The level of discount and detailed eligibility criteria for buyers will be set by local planning authorities, but the scheme will not be available to households with a combined income of over £80,000. Deposit and income requirements are also likely to be higher than for Help to Buy and Shared Ownership.
Shared Ownership
A well-established affordable housing tenure, buyers purchase an initial stake in the home and rent the rest at a discounted level. Before Help to Buy, initial stakes of over 50% were common, but lower initial stakes have now become more dominant. Until recently, the initial stake had to be at least 25%, but this has been reduced in some developments to 10%.
Deposit Unlock
Created by the Home Builders Federation, the scheme is backed by all major housebuilders and enables buyers to acquire new homes with only a 5% deposit, thereby replicating one of the key selling points of Help to Buy.
Mortgage lenders are protected by a mortgage guarantee funded by the housebuilder that covers 35% of the property value, but buyers must borrow the remaining property value and the challenge will be avoiding the 4.5x loan to income multiple cap.
According to our estimates based on Bank of England analysis, if First Homes, Deposit Unlock and Shared Ownership fulfil their potential then they could support the delivery of 50,000 homes per year in the three years after Help to Buy ends.
Other private sector schemes, such as Market Mortgage and Wayhome, will also play a role, while a further 5,000 people will be able to buy unassisted.
However, even when all this is taken into account it’s still likely to create something of a shortfall when compared to Help to Buy. And with strong price growth across the housing markets coupled with increased costs of living, higher national insurance and the prospect of a lower threshold for student loan repayments, the path to home ownership is only going to become more challenging.
What’s clear is that policy makers, housebuilders and associated stakeholders will have to continue to work together and find innovative ways to support the new homes market – adapting to market conditions and ensuring they meet buyers’ needs.
For advice about the new homes market in Suffolk contact Max Turner at Savills on 01473 234826 or MTurner@savills.com
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