What you need to know about the First Homes Scheme
BY Ned Browne
16th Jul 2021 Property
The Government's First Home Scheme has launched, but is it really the boost first time buyers need?
The First Homes scheme was launched in England in June 2021. And it was definitely a soft launch: at the time, just 12 properties from one development, in Bolsover, East Midlands, were eligible for the scheme. So it’s very early days. However, the government has loftier plans: it claims that 1,500 more First Homes will be put on the market in 2021, and then at least 10,000 per year “in the years ahead” if there’s demand.
How it works
You buy a new-build property for at least 30% less than the asking price. And that discount can rise to 50% if the local council approves that. Sounds too good to be true?
Well, there’s a big catch: when you sell the property you have to offer the same percentage discount to people who buy your property. If you play this forward, it’s not hard to envisage people struggling to be able to afford to move, as you can only use this scheme once.
Consider this example: You buy a property worth £400,000 at a 50% discount (i.e. you pay £200,000). In ten years you decide to move out - but, by then, your property is worth £600,000. You have to offer the buyer the same discount you received, so you will get £300,000 - yet to buy a similar home on the open market you would need £600,000.
Eligibility
To be eligible you need to be a first-time buyer with an annual household income of £80,000 or less (£90,000 in Greater London). Moreover, most applicants will need to live, work or have another connection, such as family roots, in the area in which they want to buy their home. There is a value cap on the homes too: the most expensive properties, post-discount, available under First Homes are £420,000 in London and £250,000 in the rest of England. Councils also have the right to add extra eligibility criteria. For example, they may prioritise key workers.
Finding eligible homes
The current advice is to “start by checking whether the builder is currently offering the scheme on the development where you want to buy.” Hopefully this advice will improve—a website listing First Homes scheme properties would be very welcome.
Is the First Homes scheme any good?
There are so many caveats that it’s hard to recommend this scheme. For example, you have to buy a new-build property and, if you ever sell, you have to offer the buyer the same discount you received. Also, only time will tell if the supply of these properties will ever reach viable levels. I suspect it will, however, as this scheme will definitely benefit the housebuilders. But, if you find a “forever home” that’s eligible, and you can’t get onto the property ladder any other way, the First Homes scheme might be a good option for you.
Read more: How to buy a property today
Read more: Is it a good time to buy a house?
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