Q I am looking into buying a new-build property and am considering using the help-to-buy scheme. I have weighed up the benefit of using the scheme and feel the interest savings over the first five years would outweigh the potential for the government’s 20% stake to appreciate in value substantially over the same term. My main concern is that help-to-buy will be restricted from next March to first-time buyers. I am a second-time buyer so wouldn’t be able to use the scheme. However, there is evidence that help-to-buy inflates new-build property prices (encouraging them to build more, I assume) so would it be better to wait until after next March and see if new-build purchase prices come down once the scheme doesn’t apply to most buyers? I am looking at a four-bedroom property at about £300,000 so assume that size of property wouldn’t be a popular first-time buyer choice and therefore most buyers would have less purchasing power once the scheme is withdrawn. Any thoughts would be great. SL
A You are right that the help-to-buy scheme in England is changing next year but it’s from April rather than March. You are also right that from April 2021, the scheme will be open only to first-time buyers of new-build homes. However, you are wrong in thinking the new help-to-buy scheme won’t apply to most buyers. Since 2013, when the current help-to-buy scheme was introduced, eight out of 10 help-to-buy properties have been sold to first-time buyers, rather than existing homeowners, which perhaps explains the government’s decision to restrict the new scheme to them.
Accusations that the help-to-buy scheme has helped to inflate new-build property prices may also explain the government’s decision to introduce a cap on the maximum amount properties can be sold for under the new help-to-buy scheme. This has been fixed at one and a half times the average first-time-buyer new-build property price (as at autumn 2018) by region. Only in London will first-time buyers be able to buy property costing up to £600,000 (which is the limit applying to all buyers using the current scheme). In the south-east, the maximum price under help to buy is £437,600 but falling to £186,100 in the north-east. These regional caps mean your prospective £300,000 property would be out of the reach of first-time buyers using the new help to buy in the north-east, the north-west, Yorkshire and the Humber, the East Midlands, the West Midlands and the south-west. Only in the east of England, the south-east and London would first-time buyers be able to contemplate buying a property costing £300,000 – and also slightly more than £400,000 – with the new help-to-buy scheme.
Whether the regional price caps will make a difference to the price of new-build properties outside the help-to-buy scheme is anybody’s guess. But if developers are feeling squeezed by the limits on what they can charge first-time buyers, it may be that they seek to reconsider the prices of properties excluded from the new help-to-buy scheme. So while the price of property suitable for first-time buyers may well come down in most of England, the cost of other new-build property may not and it could even rise.