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Ministers have ‘not thought through First Homes’ for agents and lenders

Property and lending industries remain unsure how First Homes properties will be re-sold or marketed in the future.

Nigel Lewis

first homes scheme

Agents and mortgage brokers remain unsure how the government’s flagship First Homes scheme will work when owners sell up their discounted start homes a few years down the line.

The scheme, which was launched by Boris Johnson in early June this year, enables first time buyers and key workers to purchase newbuild properties in England at a 30% discount to the market value, and is the government’s answer to the challenges faced by many young people getting on the property ladder who want to stay in their home town or area, or keyworkers live near to their job..

A restriction will be registered on the title of each property at the Land Registry to ensure this discount as a percentage of current market value and certain other restrictions are passed on at each subsequent title transfer.

What’s not clear is how these homes will be sold in the future, and how the discount will be transferred.

The biggest issue is whether estate agents will be able to market and sell these properties, or whether councils will allocate them to ‘local people’ via a waiting list.

There are also question over how mortgage lenders will calculate affordability.

Thought through

paul mahoney nova“The housing ministry people don’t seem to have thought it through,” says Paul Mahoney, MD of Nova Financial Group.

“In my opinion, it is always a mistake to try and manipulate the open market.

“We live in a free market, capitalist society so to try to falsely change the price of a property is always going to be fraught with issues. Will these buildings have a stigma attached to them on resale?”.

The industry appears not to know either. The Neg asked Ellis & Co, which is one of the few estate agents to have a page on its website about the scheme, how First Homes resales will work, but it declined to comment.

And the housing ministry has so far been unable to answer questions on First Homes, despite its latest First Homes site going live last week, at a Keepmoat Homes development in Newton Aycliffe, County Durham. Robert Jenrick (pictured, main image) says the government hopes to have 60,000 First Home up and running by the end of the decade.

Read more about first time buyers. 

August 31, 2021

2 comments

  1. The only things ministers give thought to is,
    How can they trouser more expenses, and how can they buy votes by conning tenants that they are ‘levelling-up’ ( so they can continue to claim )

  2. These schemes have actually been in operation in the new build sector for some time, typically with a 10% ‘under market value’ ticket on them, usually for keyworkers or similar status. How it works in some schemes, is say the brand new home has an open market value of £200,000 the first buyer who fits the criteria, buys it and finances the 90% of value, £180,000 and has the benefit of living in the 100% of the property.

    With house inflation say that buyer wants to sell in five years, then an open market value is given, say £250,000. Then a new buyer who fits the criteria buys the property at 90% or £225,000. The original buyer then moves on, their ‘equity’ gain being at sale price £250,000, at 90% their share or £225,000 minus £180,000, equals £45,000. So the 10% of the value always stays in the property making it more affordable.

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