The Government’s half-price property plan for first-time buyers

The Government is launching a new plan called First Homes to help first-time buyers get onto the property ladder in England. The scheme includes purpose-built properties that will be sold to first-time buyers with a discounted price from 30% to 50%.

Property experts have noted an 11% increase in property prices within the last 12 months, making housing unaffordable for many first-time buyers. Thus, there could be a huge demand for the properties within the scheme– but will First Homes really solve the issues new buyers are facing?

First homes in more detail

The properties will be marketed and sold in the same way as other new builds, but they must be sold with a minimum of a 30% discount. With council approval, the discount can be raised to 50%. This will enable many first-time buyers to get onto the property ladder with a much smaller deposit, or it could allow others to purchase a larger property.

To qualify for First Homes, you must be a first-time buyer, which applies to both buyers if you are purchasing as a couple. Moreover, the household income of the buyer(s) should not exceed £80,000, or £90,000 if you are buying in Greater London. The market cap on these properties is £420,000 in London and £250,000 in other parts of England. Councils can apply further criteria to qualify if they wish.

To prevent people from purchasing homes elsewhere and not as their main residence, you must have significant ties to the area where the property is located, such as a job.

How many first homes will be available?

There are an initial 1,500 properties ready this year, with a planned 10,000 more properties in the following years.  

First homes tipped for fragmented success

Property market analysts at Savills estate agency have been crunching the data to work out if the scheme will be beneficial to the masses of first-time buyers out there. And the results indicate there may be a north-south divide in the success of the scheme.

The data suggest a modest two-bedroom apartment in London would still be unaffordable to nearly 90% of aspiring homeowners. Yet, in the Midlands, Yorkshire, North West and North East, around 50% and above of households could afford the same type of property using the scheme.

Stuck at the bottom of the ladder?

Another problem with First Homes is that it could prevent buyers from climbing up the property ladder. When a First Homes property is sold on, it must be sold with the same discount that the first-time buyer received, meaning they do not access the full equity in their home. This could create a shortfall when trying to move up the property ladder to bigger and more expensive properties.

The Government is making it easier to hop onto the ladder, but a skip and a jump might be too big of a stretch.

June 2021