Stone Real Estate: First Home scheme could cost housebuilders £2bn a year

Jessica Nangle

February 10, 2020

new homes

Stone Real Estate believes that the latest government initiative, the First Home scheme, could cost British housebuilders £2bn a year.

The government has announced plans to cut the cost of a proportion of new build homes by 30% for first-time buyers in order to “turn the dial on affordability”.

They are yet to reveal just what proportion of new builds will fall within the scheme but has suggested tens of thousands of properties will qualify, having previously stated it could be some 19,000 homes by the middle of this year.

Stone Real Estate looked at the cost to British housebuilders based on new build sales over the last 12 months which totalled 117,256 across Great Britain according to the Land Registry.

Based on a conservative estimate that 20% of these sales could soon fall under the First Home scheme annually, this would see 23,451 homes each year selling at a 30% discount.

On the current British new build house price of £295,295, the average buyer would save £88,588 but when this saving is multiplied by the 23,451 homes that could qualify, it produces a loss of over £2bn across the new build sector on an annual basis.

Stone Real Estate believe developers in London would lose the most, with £356.5m wiped off in new build sales values.

Edinburgh (£23m), Birmingham (£16.6m), Leeds (£13.7m) and Liverpool (£13.4m) are also amongst the largest declines.

Michael Stone, founder and chief executive of Stone Real Estate, said: “A positive announcement on the face of it and one that has been made with the good intentions of addressing affordability for the nation’s first-time buyers.

“However, as is often the case, the devil will be very much in the detail and it is still relatively unclear as to how this will impact the existing parameters of the new build sector when it comes to social housing commitments and site constraints.

“As a result, this news will understandably be met with some initial concern from the nation’s housebuilders and a wider degree of scepticism from the industry as a whole for a few reasons.

“We are currently building more new homes than we have done in the last 30 years but at the same time, the number of first-time buyers, in particular, has increased dramatically.

“Previous schemes like Help to Buy have fuelled this increase in demand and ironically, the result has been an increase in house prices for the very people the Government is trying to reduce affordability issues for.

“Therefore we must continue to deliver the stock required but to force housebuilders to do so on the Government’s terms could well backfire and see the number of homes being delivered decline.

“We’ve seen a similar trend within the rental space whereby landlords have opted to leave the sector due to the recent ban on tenant fees, reducing stock and causing rents to increase.

“If this latest initiative does impact the supply-demand balance negatively, house prices will increase at a greater rate and it could arguably do more harm than good in the long run.”

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