The British housing market is facing a significant shift as the Help to Buy scheme comes to an end and mortgage rates continue to rise. This has resulted in a sharp decline in new-build property sales before completion, with first-time buyers now turning their attention to smaller, second-hand homes.
The Help to Buy scheme was introduced in 2013 to help first-time buyers get onto the property ladder by providing them with a loan of up to 20% of the property’s value. This allowed buyers to purchase a new-build property with just a 5% deposit, making the dream of homeownership a reality for many. However, as the scheme is set to end in 2023, the number of new-build property sales has decreased significantly.
In addition to the cessation of the Help to Buy scheme, higher mortgage rates have also played a significant role in the decline of new-build property sales. With interest rates on the rise, many first-time buyers are finding it more challenging to secure a mortgage for a new-build property. This has led them to turn their attention to smaller, second-hand homes, which often have lower price tags and more favorable mortgage rates.
The impact of these changes is evident in the latest housing market data, with new-build property sales before completion dropping by 20% in the first quarter of 2021 compared to the same period last year. This is the most significant decline in new-build property sales since 2010, and it is clear that first-time buyers are now favoring second-hand homes over new builds.
One of the main reasons for this shift is the affordability factor. With the average price of a new-build property reaching £314,000, many first-time buyers simply cannot afford to purchase these properties without the Help to Buy scheme. In contrast, the average price of a second-hand home is significantly lower at £255,000, making it a more attractive option for those looking to get onto the property ladder.
Another factor driving first-time buyers towards second-hand homes is the potential for a better return on investment. New-build properties often come with a premium price tag, and it can take several years for their value to increase significantly. In contrast, second-hand homes may have already seen an increase in value, making them a more attractive investment for first-time buyers.
Furthermore, second-hand homes offer more flexibility in terms of location. Many new-build developments are located on the outskirts of cities, making them less desirable for those looking for easy access to amenities and transportation. In contrast, second-hand homes are often located in established neighborhoods with easy access to schools, shops, and public transport.
While the decline in new-build property sales may seem concerning, it is a positive development for the housing market. The focus on smaller, second-hand homes is a sign of a more balanced market, where buyers have more options and are not solely reliant on new-build properties. It also presents an opportunity for developers to reassess their strategies and focus on building more affordable homes that cater to the needs of first-time buyers.
Moreover, the current market conditions provide an excellent opportunity for first-time buyers to enter the property market. With a wider range of options available, they can choose a home that best suits their needs and budget. This will also help to create a more diverse and inclusive housing market, where everyone has the opportunity to become a homeowner.
In conclusion, the cessation of the Help to Buy scheme and higher mortgage rates have led to a significant drop in new-build property sales before completion. However, this has resulted in first-time buyers turning their attention to smaller, second-hand homes, which offer more affordable prices, better returns on investment, and greater flexibility in terms of location. This shift in the market is a positive development, creating a more balanced and inclusive housing market for all. As we look towards the future, it is essential for developers and policymakers to work together to ensure that the housing market remains accessible and affordable for all.
