Help to Buy – the government’s flagship scheme to help first time buyers onto the property adder, means first time buyers are paying up to 8% more for new homes.
The study collects data from around 70,000 first time buyers purchasing a new home. It found that they paid on average £277,968 for a home, compared to the average of £257,908 of those who didn’t use Help to Buy.
Analysing the research, ReallyMoving suggests that the reason for this could be that new homes already command a 16% premium compared to second hand properties. This reflects the fact that they are chain free and come with brand new fixtures, fittings and appliances.
It also points out that buyers who are using the scheme can afford a more expensive property in order to benefit from an equity loan, making the deposit much more affordable.
What is the Help to Buy scheme?
Help to Buy enables peoples to buy new homes with deposits of just 5%. The government provides an equity loan for an additional 20%, or 40% in London. Without the scheme, many buyers would be unable to get onto the property ladder at all, due to the lack of enough disposable income to save for the £25k often required as a deposit.
Rob Houghton, CEO of reallymoving.com said: “The Help to Buy scheme has provided a leg up onto the housing ladder for many first time buyers but this data suggests that first time buyers may not be getting such a good deal after all. When they come to sell this could increase the risk that their home isn’t worth what they paid for it.”
Houghton also points out that those using the Help to Buy scheme may face difficulty when selling the property on, as it could then struggle to compete with newer homes that are included in the Help to Buy scheme, plus this could also impact its value.
When it comes to repaying the equity loan, Houghton adds, “Those hoping to sell may also find that, as they are required to repay the equity loan in full, they are unable to also raise a deposit on their next property, leaving them trapped.”