Back in January we wrote of the governments’ announcement to provide 100,000 first time buyers with the opportunity to purchase a house with a 20% discount. It has recently been announced by the conservatives that if they win the election, the number of houses will double to 200,000. Below is our guide to the Starter Home Initiative.
For this to work, builders will build houses specifically for the scheme on brownfield sites. They will then only be offered to first time buyers. The properties are to be sold at least 20% below the market rate, making them significantly more affordable and, the maximum prices of the qualifying homes will be capped at £450,000 for properties in London and £250,000 for those outside.
There are not many requirements needed to qualify for a home under the Starter Home Initiative. You simply need to be a first time buyer that is under the age of 40. And, of course, you will have to be able to raise a mortgage.
Many people are asking whether they will be able to get a mortgage or not. The answer in short is yes (if you have the income), as banks and building societies will be offering mortgages on the qualifying homes, but it is unclear as to whether mortgages will be specially designed for the homes or not.
At present, there are no homes to buy under the scheme, and it is unclear as to when there will be. However, the government has indicated that more than 30 home building companies have pledged support to the scheme and will bring sites forward for development.
Perhaps one of the biggest questions being asked is whether the discount is real. How will buyers know whether they are genuinely purchasing a house at a discount? The answer, again, is unclear. The government have failed to explain how they will monitor this, and this will become a problem particularly on developments solely made of starter homes.
The cost of building these homes will be less than the construction of ordinary homes because they will be exempt from usual requirements such as S 106. Agreements. Currently, 106 Agreements can require affordable housing to be included within a development or a payment to be made to the local council. Figures from the government indicate that such agreements typically add around £15,000 to the cost of each new home being built.
On top of being exempt from these agreements, the Conservatives have suggested that if they were to win the election, they will look at making starter homes exempt from the Community Infrastructure Levy (CIL).
Many first time buyers that are interested in the initiative are unsure what happens if they buy a starter home through the scheme, but then want to move.
During the first five years after the property is built, it will need to be available to buy at the 20% discounted price. This means that any owner selling during the first 5 years will have to ensure that they are to sell to a first time buyer and at the discounted rate. The government have even suggested that they may try to ensure that the properties are sold with covenants attached, ultimately restricting their resale.
The Starter Home Initiative is very unlikely to solve the ongoing housing crisis in the UK, even at the 100,000 level. With many of the questions above remaining unanswered, it is unclear as to how successful the scheme is going to be, so we, along with many others, will just have to wait and see….
04.03.15 www.propertysurveying.co.uk BT