UK Government's 'Your First Home' Scheme Sparks Debate Over New-Build Exclusivity

The UK government's 'Your First Home' scheme, intended as a successor to Help to Buy, is facing scrutiny for its exclusive focus on new-build properties. The initiative aims to assist first-time buyers by allowing them to purchase a home with a 2.5% deposit, supplemented by an equity loan of up to 20% of the property's value, which can reduce mortgage costs in the initial years.

However, the restriction to new builds has drawn criticism, with some property experts advocating for its expansion to include older, pre-owned homes. The core rationale behind the government's support for first-time buyers is to stimulate the housing market. By directing this support towards new-builds, policymakers hope to increase demand, thereby encouraging housebuilders to increase construction rates and contribute to economic growth. "The government’s new Your First Home Scheme is aimed at those buying new-build homes because they want builders to build more homes," noted Mark Harris, chief executive of mortgage broker SPF Private Clients. "The hope is that increasing demand for such homes will encourage developers to build more to satisfy that demand."

The previous Help to Buy scheme, which ran from 2013 to 2022, also exclusively targeted new builds. It provided first-time buyers with equity loans of 5% to 20% (up to 40% in London) on new homes. Over its lifespan, Help to Buy supported more than 328,000 first-time buyers and facilitated the purchase of over 387,000 properties, with a total value of approximately £109.2 billion. Despite its scale, the Institute for Fiscal Studies (IFS) concluded that Help to Buy had a limited impact on housing affordability, partly because its restriction to new builds meant it was used for properties that were "relatively rare in most areas."

Further analysis from SAM Conveyancing suggested that the Help to Buy scheme inflated new-build property prices by an estimated 70.1%. The firm also noted that housing delivery stagnated during the scheme's operation, failing to reach the peaks seen in previous years. SAM Conveyancing argues that continuing to focus government support solely on new developments with the 'Your First Home' scheme will largely benefit developer balance sheets without significantly increasing construction capacity.

Data from HM Revenue & Customs indicates a significant price premium for new-build homes, which average £396,889 compared to £283,194 for older properties—a difference of 40.1%. To avoid recreating an "artificial price bubble," SAM Conveyancing urges the government to extend the 'Your First Home' scheme to encompass the secondhand market. Andrew Boast, chief executive of SAM Conveyancing, stated that allowing equity loans for existing properties would "transform the policy from a developer subsidy into a catalyst for property market activity." He added that this would enable first-time buyers to purchase established homes, in turn freeing up existing owners to move to larger properties and improving the fluidity of the housing chain.

Conversely, some industry figures believe that maintaining the focus on new builds is crucial for stimulating housing development. Paul Rickard, chief executive of Pocket Living, argued that "Your First Home is not only aimed at supporting people to buy their first home, but it also stimulating new housing delivery, including affordable and social homes, in a climate of challenging new build sales, hence targeting the programme at new homes."

Further details on the 'Your First Home' scheme, including its launch date, are anticipated in the upcoming Budget on October 28.