Support, Advice and Experience within the Property Market

Cutting the Cost of New Homes

From Robert Ulph on March 6, 2020

The Housing Secretary, Robert Jenrick MP, has announced a new scheme to help first-time buyers to get onto the housing ladder. The First Homes scheme will cut the cost of some new homes by a third and will mean that the discount will be carried forward each time the property is sold, so that future first-time buyers continue to benefit.

The scheme which is to be prioritised for key workers such as nurses, teachers, police officers and firefighters, and those in the armed services aims to make property more affordable to first-time buyers in their local areas, so that they do not need to look to move elsewhere in order to buy. It will also include the measures to help release more land for new homes to be built.

With the average price of a new build in England at £314,000, the First Homes scheme could deliver a £94,000 saving with a 30% discount. A significant reduction in the purchase price but in addition this would mean it could enable first-time buyers to get on the ladder faster, as it also takes more than £18,000 off a 20% deposit.

The Government has launched a consultation to finalise scheme details and how it would work as the discount will only apply to a proportion of new homes. The cost of the scheme will be covered through the contributions that housing developers provide through planning applications, which are in place to ensure that new developments also provide benefits for the local community. These Section 106 planning contributions are, however, usually used to provide affordable housing in the local area or as part of the new development, so there is concern among some in the industry that social housing may be affected by this.

“First Homes will be life-changing for people all over the country looking to buy their first home,” stated Robert Jenrick MP at the scheme launch.

“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 First Homes scheme is in addition to the Help to Buy scheme which provides a reduced deposit and equity loans of up to 20% (40% in London) to help first-time buyers and has, since its launch in 2013, helped more than 190,000 people to buy their first home.

The consultation is open so it will be interesting to see the scheme take shape and the benefits for first-time buyers and I will keep you up to date with this. If you have any questions on this or anything in the local property market, please call me.