It’s not easy to get on the property ladder. Even before you add in the complicating factors of conveyancing and contract law, there’s the not-at-all-small issue of actually being able to afford it.
Studies have shown that it’s cheaper to pay a monthly mortgage than to rent a comparable property, and this is true no matter what part of the UK you’re in. Of course, in order to benefit from these attractive savings, you’d need to be able to cough up the deposit.
According to the very latest figures (we got them from the BBC, we don’t have access to some kind of secret society of estate agents) the current average property price in the UK is just under £225,000. A 10% deposit on a property of that price would set you back an eye-watering £22,000.
Of course, average property prices are just, well, an average. Property in some areas will be cheaper and in others it will be a whole lot more expensive. Many would-be buyers have found themselves effectively priced out of the locales they’ve lived in all their lives due to popularity and property prices spiralling ever upwards.
Is there anything to be done about this conundrum?
Here’s a bit of good news for you: yes!
The government have announced plans for a First Homes scheme. The scheme sets out to make homes affordable for local people. (Though it’s only on offer in England, we’re afraid).
The plan is for flats and houses built on new developments designated as part of the scheme to be sold with a discount of at least 30% off the market price. In pricier property areas, local authorities will be able to set a bigger discount of 40% or even 50%. Price caps will apply after the discount: £450,000 in London and £250,000 elsewhere.
Now, before you get all excited about being able to buy discounted property and turn it over for a hefty profit, let us politely point out that this is very much not the point of the scheme. And anyway, the powers that be are already on to you: each property will be sold with a covenant to ensure that the original discount is passed on when the property is sold.
Who will be eligible for the scheme?
There’s a clue in the name that the scheme is primarily designed for first time buyers (i.e. those would qualify for Stamp Duty Land Tax relief). However, it’s fair to say that it’s not just first-time buyers who might be struggling with the scale of property prices.
There are plenty of homeowners who are essentially ‘stuck’ in property that’s no longer suitable for them. The government plan to publish guidance on circumstances where non-first-time buyers would be considered eligible.
Now, here’s where it gets more complicated. Some eligible buyers will be considered more eligible than others. (Animal Farmvibes, anyone?!)
These priority buyers include:
- Those with a ‘local connection’. Local authorities will choose exactly what’s meant by this, but it’ll probably be based on current address and place of work
- Key workers, specifically nurses, teachers and police officers
- Serving members and veterans of the Armed Forces
When each property goes on the market, it will only be on offer to those in the priority category for the first three months. If it hasn’t sold in that time, other first-time buyers will get a look in, though, again, some existing homeowners may also be eligible. (If you think this is confusing, don’t blame us. We don’t make the rules.)
Whether the buyers are local or not, key workers or not, first time buyers or not… there’s one criterion we suspect there will be no flexibility on. The eligibility income cap! To qualify for the scheme, buyers must have a combined household income of under £80,000 per year (that figure jumps a bit to £90,000 for London types).
Will the conveyancing process be any different?
According to the announcement from the government, buyers will be able to proceed as with any other property purchase in terms of getting a mortgage and instructing a solicitor. The only difference will supposedly be that the property will be sold at the discount set by the local authority.
Speaking as esteemed (ahem) and experienced solicitors, we’d add a little bit of healthy scepticism here. If nothing else, we’d bet our last packet of crisps that the simple fact of a property being part of the scheme will add at least a month to the conveyancing process.
Can you rent out the property?
Again, as this is a scheme designed to help first time buyers get on the property ladder, letting the property out is not really the point. Property in the First Homes scheme should be purchased as the buyer’s main residence.
However, life is not always predictable (especially for armed forces buyers, we imagine) and there is a clause to say that the property can be let out for up to two years, though the local authority would need to be notified.
What about selling the property?
If and when the property came to be sold again, there would be a covenant on the deeds to say that it had to be sold with the same discount it was bought with. This means the scheme can continue to benefit other first-time buyers in the future.
The homeowners would be required to get an independent valuation (i.e. not just the estate agent who would be earning the commission) in order to work out what the property would sell for on the open market.
The homeowners would then need to apply the 30%, 40% or 50% discount they originally purchased with before selling it on. Buyers would again be restricted to those who met eligibility criteria for the scheme, including prioritising ‘priority buyers’ for the first three months.
When will you actually be able to get hold of a property?
If you think you might be eligible (or even priority eligible), you may well be itching to start perusing RightMove for scheme-designated properties. To that we say… you might need to hold your horses.
The government have made a commitment that 25% of all affordable housing developments from developer contributions should become part of the scheme. This means that there should be a fair number of these properties available, though how long they’ll take to come to market is anyone’s guess.
If you’ve got any more questions about home buying schemes like these, or if you’d like to hear more of our no-doubt excellent predictions, please do drop us a line.