Finance

WILL YOU BE TOO LATE?

For years now the UK government has been helping first time buyers to become home owners, splashing out billions of pounds in the process.

But even though the chancellor in the last budget suggested that austerity is coming to an end, there has to be real doubt whether the government can continue to subsidise home ownership at current levels of expenditure.   

Could the government freebies for first time buyers be coming to an end? Will you be too late to take advantage if you don’t get your skates on?

The main initiatives of the government are:

  • Right to Buy
  • Right to Acquire
  • Shared Ownership
  • Help to Buy equity loan scheme
  • Stamp duty exemptions for first time buyers 
  • Help to Buy ISA.

Are you likely to miss out on the undoubted financial benefits of these home ownership initiatives if you don’t take advantage fast?

If there is a change in government, is the new government likely to be so favourable to home ownership?

1. Right to Buy

The Right to Buy – your right to buy your council house if you meet certain criteria – has been going so long, almost 40 years, it is easy to get the impression that it is here to stay.

However, there is an argument that the sale of council houses without replacing them simply makes it harder for councils to find affordable accommodation for the homeless.

A Jeremy Corbyn government could limit or even remove the Right to Buy. 

If you have the Right to Buy and sit on your hands, the big danger is that rising house prices will make your purchase less affordable over time.

If you can afford to buy now, it makes sense to proceed since the scheme – which is certainly very generous – cannot be considered a certainty to last.

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2. Right to Acquire

The Right to Acquire is basically the equivalent of the Right to Buy for properties owned by housing associations.

The scheme is nowhere near as generous in terms of the discounts offered to tenants; however, there are plans to extend the scheme and the levels of discounts could increase.

At first glance, this scheme looks like it will be around for a while and will become more attractive for first  time buyers.

However, that is not certain and again it remains to be seen whether a new government of a different political colour will be as favourable to the scheme.

For many decades now the political orthodoxy is that home ownership is a good thing and should be widened. However, affordability issues have challenged that notion; home ownership is falling and the number of renters is growing.

There are already strong indications that future governments, whatever their political persuasion, will be more inclined to focus on renters.


HELP FROM THE GOVERNMENT
Government help to buy (government financial help for first time buyers)
More help from the government (right to buy, right to acquire and shared ownership)

3. Shared ownership

The future for shared ownership seems bright. Housing associations are building more housing units and often their units are offered on a shared ownership basis.

However, if you are thinking of buying a shared ownership unit, the big challenge for you is falling affordability.

Even though prices are currently flat-lining in London and the South East, they are increasing elsewhere in the country.

The longer you take to buy, the more likely prices will increase – making it harder to succeed.

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4. Help to Buy equity loan scheme

On qualifying new developments, the equity loan scheme enables you to buy a property with a 5% deposit and a government loan of up to 20%  (if you live outside the London area) or up to 40% (if you live inside the London area).

The loans are government-subsidised and very attractive for buyers.

However, this is a government scheme which has already been extended twice and is now scheduled to end in 2023.

Although the deposit needed is only 5%, that can be a significant sum in some parts of the country.

If you are looking to take advantage of the scheme, you need to move fast if you have to save a deposit and it will take you a few years to do so.

Consider ways you can raise a quick house deposit.

WHY YOU SHOULD BUY
Say no to being a tenant forever (how to escape the tenant trap)
Best time to buy (a look at the ideal time to buy a property )
Why become a homeowner (the many benefits enjoyed by homeowners)


5. Stamp duty exemptions

There are two stamp duty exemptions available to you if you are a first time buyer.

If you are buying a regular property for less than £300,000 you pay no stamp duty; if you are buying for between £300,000 and £500,000 you pay a reduced rate, thereby gaining a saving of £5,000 on the normal amount due.

If you are buying a shared ownership home up to £500,000 you will be exempt from stamp duty.

Again, there is no indication that these exemptions will be permanent. If house prices start to rise again to the point of overheating, the government could remove the exemptions as a way of cooling the market.

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6. Help to Buy ISA

The effect of the Help to Buy ISA is that the government will contribute up to £3,000 to your savings to buy a property as a first time buyer.

If you purchase with someone else, you will each get £3,000 – giving a total of £6,000.

In parts of the country where property is affordable, £3,000 (or £6,000) will make a big contribution to your deposit.

Many will argue that this scheme is too generous and is unfair as renters don’t get an equivalent gift.

The current government is unlikely to keep it going forever and a new government may want to shift funding towards the hard-pressed rental sector.    

Conclusion

Especially in the last five years, the government has been very proactive and generous in helping first time buyers get onto the property ladder.

However it has been at considerable expense to the tax payer and there are strong indications that future governments will shift their priority to renters.

If you are looking to take advantage of the government’s help for first time buyers, it would be prudent to move fast.

If you delay, there are clear signs that you will be too late or, at the very least, will have fewer or less generous benefits to choose from.

Are you thinking of taking up any of the government’s initiatives for first time buyers?  Is there anything that is holding you back? Please leave your comments below.

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Dalton Barrett
Rebel Property Coach

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My website is: www.rebelpropertycoach.com

 

 

 


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