First-Time Buyers Paying 12% Help to Buy Property Premium

First-time buyers (FTBs), using Help to Buy, paid an average of 12% more for their property when compared with independent buyers.

According to the data, collated by Reallymoving.com, the 44,000 FTBs using Help to Buy that requested reallymoving for quotes on home services, paid £303,000 for their new home in February. In comparison, first-time buyers that opted to buy their property independently, spent £270,000.

In October, the Help to Buy Premium priced homes at 8% above independent buyers; this has now increased to 12% in January and February.  When 57% of all home buyer activity in the opening two months of 2019 consisted on FTBs, and 18% of buyers are restricting their property searches exclusively to new property, it is clear that Help to Buy is now an important tool enabling FTBs achieve a new home possibly before they have the actual means to do so.

The lure of an affordable 5% deposit and additional 20% equity loan from the government which remains interest free for five years has seen an explosion of FTBs relying on the scheme. However, many critics have claimed that this enables buyers to purchase property out of their budget with many FTBs neglecting to consider the loan and interest that will be liable after a five-year period. Additionally, the possibility that developers are encouraging FTBs to inflate their offer could mean that buyers are unable to afford the repayments and could struggle to resell the property at a later date, potentially trapping them.

Rob Houghton, CEO of reallymoving, said: “Help to Buy is indeed helping first time buyers get onto the housing ladder, but 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 their 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.”

Has Help to Buy increased the amount of work conveyancers are receiving? Are conveyancers worried by the long-term effects of Help to Buy on the property market?

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