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TODAY'S OTHER NEWS

Is Help To Buy a Rip Off? First time buyers pay 12% premium

First time buyers purchasing new homes using the government’s Help to Buy equity loan scheme paid on average 12 per cent more in February 2019 than those buying new homes without the scheme.

The claim comes from home moving company Reallymoving, which has analysed data collected from over 44,000 first time buyers using its services over the past 12 months.

Those using Help To Buy paid on average £303,000 in February compared to £270,000 paid by those buying independently.

The company says that for first time buyers struggling to raise a deposit, the Help to Buy scheme can seem like a lifeline, enabling them to buy a new home with a deposit of five per cent topped up with an interest-free five year government loan of 20 per cent - or 40 per cent in London.

“However, strong demand for the scheme may be encouraging developers to charge higher prices for Help to Buy homes, while also encouraging buyers to pay over the odds by giving them greater spending power” says the company.

This so-called Help to Buy premium has risen sharply over recent months, with an eight per cent premium in October increasing to 12 per cent in January and February 2019.

Rob Houghton, Reallymoving’s chief executive, says: “These figures suggest that they may be paying more than the property is worth in order to get the help they need to raise a deposit. This could be either because developers are charging a premium or because first time buyers are encouraged to buy a more expensive property because the scheme gives them greater spending power. 

“Either way, when they come to sell, they may find their property is worth less than they paid for it, made worse by the fact they could be competing with other new developments nearby that are available with Help to Buy, while their own property is no longer ‘new’ and therefore ineligible for the scheme.

“I urge those using Help to Buy to consider how long they intend to hold the property, whether they can afford the loan repayments on top of their mortgage when they five-year interest-free period comes to an end and how easy it will be to resell. Meanwhile, housebuilder financial results speak for themselves, with Persimmon last month announcing profits of over £1 billion, or £66,00 per home sold.”

  • Andrew Stanton Estate Agency Insights And Strategies

    I agree that new home builders can sell at a higher value due to help to buy, but on the flip side I have met many vendors selling their new home who enjoyed a large equity slice from buying a more expensive home, then sold and used the 75% slice of the equity to buy another home. Also, if a brand new home sells at an inflated value as it can sell to a help to buy buyer, does this value not help the second hand market as older property will also benefit from an uplift. Eg, if a new semi retails at 300k, then a 20 year old semi 500 metres away is not going to sell for 200K,

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    Help to buy is a ticking time-bomb.

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