A £250 million package to help thousands of first time buyers onto the UK property market has been met with mixed reaction, welcomed on one hand but derided as not enough on the other.
Buyers will have to put up a 5% deposit, the government and homebuilder will cover 10% each and then the remainder of the amount will be covered by a loan. But it only applies to those buying new properties.
The British Property Federation has led to support for the move announced in the 2011 Budget, saying that the Firstbuy Direct scheme will help an estimated 10,000 individuals onto the housing ladder.
‘This package broadly makes sense, because it targets home deposits, and is about as much as the government could realistically do in current circumstances,’ said Ian Fletcher, director of policy at the BPF.
With first time buyers currently needing an average deposit of £25,000, this will drop to around £6,250 for those taking part in the scheme, according to Nicholas Leeming, business development director at Zoopla.
‘This is a very appealing prospect, but Osborne’s scheme won’t go beyond scratching the surface of the problem faced by the vast majority of first time buyers, as it is exclusively for new build properties and only around 11,000 buyers will benefit, a fraction of the overall number of potential first timers,’ he explained.
Nick Vaughan, head of residential development and investment at Hamptons International described it as a step in the right direction to bring stability and growth back to the housing and, in particular, the development market.
‘The changes will mean, subject to conditions, that a first time buyer can buy a new build property at a significantly more affordable loan to value rates rather than current rates which are currently pricing this type of purchaser out of the market,’ he explained.
Robin King, director of Move with Us, believes this will have a positive impact on the property market. ‘The more money that the Government can encourage to be pumped into the property market the better for all of us. Introducing the Firstbuy direct scheme is a step closer to reducing the first time buyer crisis and should ultimately help to stimulate the housing market,’ he said.
He added though that the jury will be out on whether this new initiative from the Chancellor will be sufficient to really move the market forward, bearing in mind it affects only one part of the market and these people will still need to be assessed for loans. ‘At the end of the day, lenders will still hold the keys to unlocking growth in the wider market and we are disappointed that the Chancellor has not tackled lending practices,’ he added.
Like many in the industry, Chris Spedding, relationship director for house building and building materials at the major corporate division of Lloyds Bank, pointed out that first time buyers are critical to the flow of business into these sectors and, to a large extent, these buyers have been frozen out of the market since 2008.
‘However, this latest initiative must be viewed in context as this scheme will only partially fill the gap left by previous shared equity schemes which have now run their course, such as Homebuy Direct. The First Buy scheme is definitely a big sign of an increased level of support for the house building sector from the coalition government, and it is indicative of how housing appears to have moved up the government agenda over the last 12 months,’ he said.
‘This is good news for the sector, but it remains a relatively temporary fix and the industry may well be looking for something more substantial from the government over the next couple of years to help bolster growth,’ he added.