Government to cut cost of new homes by a third

Jessica Nangle

February 7, 2020

Housing Secretary Robert Jenrick (pictured) has proposed plans to cut the cost of a proportion of new homes by a third for first-time buyers.

The proposal, known as the First Homes scheme, hopes to give more people the opportunity to buy a home in their local area.

This has the potential to save eligible first-time buyers on average around £100,000.

The discount reportedly will be prioritised for veterans and key workers such as nurses, police officers and firefighters.

The scheme will lower deposit and mortgage requirements for local first-time buyers in England, with the discount applying to a proportion of new homes.

The government is set to consult on how this will be delivered.

Jenrick MP said: “First Homes will be life-changing for people all over the country looking to buy their first home.

“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.”

The average price of a newly-built home in England is £314,000.

Under First Homes, a property sold with 30% off this price would deliver a £94,000 saving and enable first-time buyers to get on the ladder faster by taking more than £18,000 off a 20% deposit.

The consultation describes how government will ensure First Homes are affordable, with one point discussing how discounts in perpetuity will be achieved by “placing restrictive covenants on these homes, which will require that the property is sold at the original percentage discount in each subsequent resale”.

The consultation furthers that “these covenants will be re-established with every new purchaser of the property.

“When the property is sold, buyers will not be able to secure good title over the property unless the covenants enforcing the discount are met.

“Conveyancers and mortgage lenders will therefore have a strong interest in enforcing the use of these covenants.”

This scheme comes as the government has committed to delivering more than one million new homes over the next five years to further improve the affordability of housing.

The proposals published today also include measures to help release more land.

More than 240,000 new homes were delivered between 2018 and 2019, which is more than at any point in the last 30 years.

The government is determined to rebalance the housing market to support homeownership through new schemes such as First Homes, building on existing support including Help to Buy equity loans which have helped more than 190,000 people take their first step on the property ladder.

The latest figures show the number of first-time buyers reaching 357,090, an 11-year annual high and an increase of 84% since 2010.

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.”

This scheme comes after Help to Buy was extended to 2023.

Jackie Bennett, director of mortgages at UK Finance, added: “Buying a home locally can be a big consideration for house buyers, but sometimes the prices are simply out-of-reach.

“The First Homes scheme is a great initiative by the government to fix this problem and we are looking forward to working with them to finalise the details and help house hunters become home owners – in their own neighbourhood.”

Daniel Hegarty, chief executive at Habito, said: “With the cost of the average UK home around £233,000, first-time buyers currently need to save more than £23,000 if they want to buy with a deposit of 10%, leaving them with a mortgage worth 90% of the property’s value.

“Today’s announcement from the government could unlock the door to thousands of new first time buyers, including veterans and key public sector workers, who have previously been priced out of an increasingly expensive housing market.

“A minimum discount of 30%, resulting in a saving for eligible first-time buyers of an average of £100,000, will be highly meaningful to many people.

“However, with house-price growth consistently outstripping wage growth, we would ask the Government to carefully consider the scheme’s eligibility criteria and look closely at what more can be done for young people who aspire to buy their own home.”

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