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Number of new build properties bought by first time buyers up by 16%

  1. 13 March 2019
  2. By Andi Michael

With questions around new build properties and the profit from Help to Buy schemes, we had a look at our data to determine whether first time buyers were making use of government schemes, and what that might mean for them long term.

It’s no surprise that the majority of first time buyer schemes focus on new build properties – if there are not enough properties to buy, by increasing the availability, it should reach demand and ensure prices are reasonable, right?

And yet, news of Persimmon’s £66,000 profit per unit last week didn’t have many congratulating the developer on their good fortune. As one of the main developers to benefit from Help to Buy, some consider that amount of profit per property to be outrageous. It’s also hard to see how prices aren’t being inflated.

We’ve seen from our data that 17% of first time buyers chose new build properties this year to date and that’s up from 15% last year. We’ve also seen a 13% increase in the number of first time buyers choosing a new build using the Help to Buy Equity Loan.

First time buyers are the active majority in the market at the moment, from mortgages to purchases (and make up 57% of buyers on our site), but with affordability being such an issue across the UK, they are priced out from buying existing homes. Options like Help to Buy and Shared Ownership help first time buyers to afford a brand new home.

However, there can be multiple problems with this. The first is issues with the quality of the properties, where snagging lists can venture into the highs of 700 fixes. The second is the issue of hidden leaseholds and ground rents, which have been highlighted as problematic time and again when buying directly from developers and using their recommended conveyancer.

The third issue is one of value – with Help to Buy allowing a first time buyer to get a brand new home with only a 5% deposit, securing not only a mortgage but a government loan to buy it, the question is whether the property is really worth the price. We showed from our research last year that first time buyers choosing a new build with the Help to Buy Scheme paid 8% more than those buying a regular new build. This could be either that there is a premium or that first time buyers are encouraged to buy a more expensive property because the scheme allows for it.

In either of these scenarios, the value when it comes time to sell isn’t considered. The ideal buyer for a second-hand Help to Buy new build is likely to be another first time buyer. However, they won’t qualify for the Help to Buy scheme on that property. So who is going to buy these homes when the time comes to sell? And if they have been sold at a premium, how can buyers be sure that it’s a good investment?

With the Help to Buy loan repayment starting 5 years after purchase, many first time buyers may intend to sell before then, but that may not always be possible.

Help to Buy offers multiple options for first time buyers who struggle to save a deposit but there is very little support for those who would like to buy an existing property, which would benefit sellers and boost the property market overall. With the power first time buyers have as an active group within the market, supporting them in buying existing homes would probably be to the benefit of many people, and the industry as a whole.

However, until government schemes support this, first time buyers will choose new build properties as the only option they can get help with to get on the ladder, even if it costs them more in the long run.

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