Warning for first-time UK buyers ahead of Wednesday’s Budget
Key Points
- Government will detail its Your First Home scheme in Wednesday’s Budget
- Scheme offers 2.5% deposits and a 20% equity loan on new-builds
- Yopa CEO warns it could push house prices higher
- Developers must contribute towards the scheme’s cost
- Industry wants more focus on building affordable homes
Yopa CEO Verona Frankish has warned that the government’s 2.5% deposit scheme could push UK house prices higher.
The government confirmed on 26 September that it will reveal further details of its Your First Home scheme in Wednesday’s (28 October) Autumn Budget.
The scheme will let eligible first-time buyers purchase new-build homes with deposits as low as 2.5%, backed by a 20% government equity loan.
Developers taking part in the scheme will also have to contribute towards its cost, raising questions over how many new homes it will actually deliver.
“There’s no question that first-time buyers need help getting onto the property ladder, but the Chancellor needs to be extremely careful that Wednesday’s Budget doesn’t simply repeat the mistakes of the past,” said Frankish.
She added that years of initiatives designed to stimulate demand have pushed house prices further beyond the reach of aspiring homeowners.
“A smaller deposit requirement may provide a welcome short-term boost, but unless we’re building enough suitable and affordable homes, we risk inflating prices further and leaving buyers financially stretched, with the added danger of negative equity should market conditions change,” Frankish added.
Developers also want the government to address the cost of building the homes the scheme relies on.
“While the proposed first-time buyer scheme may help stimulate demand for new-build homes, the real test will be whether it improves the commercial viability of bringing additional housing stock to market,” said Andy Morrison, Director of developer UK Property Development.
Morrison said developers already face substantial upfront costs, planning delays, infrastructure requirements and rising construction expenses.
“If they are also expected to contribute towards the cost of government-backed buyer incentives, the Chancellor must ensure this doesn’t create another financial obstacle to delivery,” Morrison said.
He wants the Budget to focus on unlocking viable development land, improving the planning process and cutting the cost of bringing sites forward.
“Without that balance, stimulating demand alone will do little to address the underlying shortage of homes,” Morrison added.
Adam Day, Head of estate agency eXp UK & Europe, said buyers and sellers need a stable economic environment more than new incentives.
“We don’t necessarily need another headline-grabbing housing initiative. What we need is a coherent approach that supports affordability, encourages transactions and gives the industry the certainty to plan ahead,” said Day.
