The government’s First Homes initiative officially launched last month – offering first-time buyers in England the chance of home ownership with discounts of 30-50 per cent.
But what how does it work? Who is eligible? And what does it mean for buyers in Suffolk?
A successor to Help to Buy, the discounted homes will be sold to local people who are struggling to purchase a home at market prices. Only first-time buyers are eligible and the household income must not exceed £80,000 (£90,000 in London).
Buyers must also use a mortgage for at least 50% of the price of the discounted home – and those who can afford to purchase a property without a mortgage will not qualify for help. The homes will also be subject to a post-discount price cap of £250,000 (£420,000 in London).
Importantly, local councils can have a say on the eligibility criteria and it could therefore vary depending on location. Some authorities may extend the scheme to key workers, for example, or allocate further discounts to make schemes more affordable.
Buyers also need to be aware that many of the restrictions apply in perpetuity. When they come to resell the home, the discount will be passed on to the purchaser, who must meet the eligibility criteria defined by the local authority.
If a First Homes property were to be valued at £350,000 for example, a first-time buyer would receive a 30% discount of £105,000 – purchasing the property at £245,000.
When that owner comes to sell – and assuming the property has increased in value by 10% to £385,000 – they would receive £269,500 from the sale.
The government has asked developers to ring fence 25 per cent of all new homes built as First Homes, so assuming that target is met then most parts of the country should have properties coming to the market by early 2022.
Savills’ own research has raised questions about the scheme – particularly in parts of the country like the East of England where affordability is already stretched.
If the price of a 700 sq ft two bedroom First Home is £175,000, for example, this means first time buyers would need an income of £37,300 (based on a 15% deposit and being able to borrow a sum four times their annual wage). The proportion of households in the region with
this required income sits at just 36%.
Although more affordable than if on the open market, the scheme looks likely to benefit fewer people in the East than in other areas of the UK.
The primary consequence is that developers may opt to build smaller First Home properties that fall within the value cap, rather than larger properties suitable for family housing.
That said, any effort to encourage first-time buyers onto the housing ladder is welcome and First Homes offers another route to home ownership – giving those who would otherwise be renting greater security of tenure.
For those eligible it is well worth doing your research and asking your local agent or developer what homes they have in the pipeline.
For more advice, contact Max Turner at Savills Ipswich on 01473 234826.
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