In April this year, the government launched its new version of the Help to Buy scheme – capped on a regional basis – to try and help more first-time buyers in England to get on the property ladder before the scheme is due to close completely in March 2023.
With the new scheme, equity loans are offered where the government lends first-time buyers funds to buy a newly-built home. However, property prices are now capped based on the average prices in that region – so it would be different for a buyer in London compared to a buyer in, say, Manchester, Newcastle or Portsmouth.
Now, though, new research has shown a noticeable shortage in the availability of eligible properties across the country, only four months after the new version of the scheme was launched.
According to research carried out by online estate agent Strike – which analysed data from Rightmove, Zoopla and the Office for National Statistics (ONS) – just 6% of all the properties listed currently qualify for the Help to Buy scheme.
Only 13% of all of the properties listed are new builds, with only 43% of the new builds listed even eligible for Help to Buy in their area based on their price.
The point of the scheme, to help struggling first-time buyers onto the ladder, doesn’t seem to have played out in reality, with the findings showing that – overall – counties with above-average income had better availability of Help to Buy properties. Meanwhile, lower-income regions tended to have lower availability.
For example, in Tyne and Wear, where the median income is just £22,600, only 9% of listings were new builds — while only 14% of those were below the Help to Buy price cap. In total, then, there were only 51 properties in the whole of the county that qualified at the time of Strike’s analysis, in an area home to over a million residents.
By comparison, Merseyside – where the median income stands at £23,400, and 13% of properties were new builds – a huge 71% of homes qualified for Help to Buy, with residents having 476 properties to choose from.
London, despite having the highest median income, bucked the trend on above-average availability of properties in higher-earning regions. Of the properties listed in the capital, only a very lowly 14% were new builds and 35% of those were in the Help to Buy price cap. That means only 4% of all listings analysed were eligible, making the job of finding a Help to Buy home much trickier than expected for Londoners.
On the other hand, those living on the Isle of Wight – a small island off the South Coast of England – could have the most options at their disposal. Some 9% of properties listed there are new builds and 78% of these are eligible for Help to Buy, the highest rate of Help to Buy eligibility of anywhere in the UK.
Help to Buy availability – worst in class
“The government’s latest scheme to help more first-time buyers get their foot on the property ladder is a great scheme in theory. However, stringent rules on it only applying to new build properties, and a clear lack of availability for these eligible homes, means that very few are likely to even be able to qualify for the Help to Buy scheme,” Sam Mitchell, chief executive of Strike (formerly known as HouseSimple), said.
He added that, while the government’s mortgage guarantee scheme is also available to first-time buyers, helping to increase affordability with 5% deposits, the revamped Help to Buy scheme is ‘clearly hamstrung by a lack of affordable stock’.
“We’ve long struggled as a nation with a supply and demand imbalance issue, which continues to push up house prices and make homeownership only a distant dream for many,” he continued.
“With the scheme only running until March 2023 it will be interesting to see how many actually benefit – or whether changes will be made to make it more worthwhile and affordable for first-time buyers.”
Will this make developers reconsider?
With so few new homes meeting the criteria for one of the government’s flagship housing schemes, it may be that more developers will want to look again at part exchange schemes.
In essence, part exchange schemes help to eliminate risk and increase your value as a developer. How is this achieved? Well, Part Exchange (or PX) schemes enable a developer’s customers to buy and sell in one swift, hassle-free transaction.
With the new Help to Buy scheme solely supporting first-time buyers and quite limited in what it offers (both due to criteria and local property prices), it could be that more developers will want to try and tempt existing next-time buyers to consider new builds by increasing your promotion of PX as a way of making any move simple, quick and affordable.
PX schemes are aimed at those who have a property to sell, and with affordability of new builds a challenge for first-time buyers for a host of reasons, next-time buyers are an obvious target for developers/
A key appeal of PX is that it allows the next-time buyer to secure the plot they want without the risk that they won’t find a buyer on the open market. In the uber competitive market that we are currently operating in, this could make all the difference to the buyer. They will have certainty over both the sale and the moving date.
Meanwhile, from your point of view as a developer, you will have full control over the whole transaction – from the timing to the pricing.
Here at HBB Solutions, we’ve aimed to make the process as simple as possible for you and your customer, by managing the whole process and leaving you to focus on building houses and attracting new customers. All you need to do is fill out an Offer Request Form with your customer and send it to us, we’ll then arrange a valuation of your customer’s property, and within 24 hours of the valuation, we will send an offer. Afterwards, your customer completes an Offer Acceptance Form, and we can then agree on a completion date that suits your customer.
Some of the major benefits of part exchange to developers and sellers are attracting more customers, closing more sales and staying out of debt, avoiding budget capping and standing out as the top seller in your patch.
As the new Help to Buy scheme appears to make it harder for first-time buyers to afford a new build, part exchange may prove to a be a lifesaver for many developers over the coming months as they seek to target next-time buyers instead.
For further guidance on incorporating part-exchange into your house offers, please contact HBB Solutions today. You can also take the first step towards better business by requesting a free consultation with one of our property experts.