Help to Buy price difference is rising, new study shows

The difference in the price paid by first time buyers for new build homes with Help to Buy, compared to the price paid by those buying new homes without the scheme has increased.

New research shows that the price difference increased to 12% in January and February this year compared with 8% in October 2018.

The study from ReallyMoving says that this could be because developers are charging a premium for homes for sale through Help to Buy and warns that the property may not be worth what the buyer paid for it, when they come to sell.

The research also found that first time buyer accounted for 57% of all home buyer activity during January and February, a record high while 18% bought a new build home in January, another record high.

Those using Help to Buy paid on average £303,000 in February compared to £270,000 paid by those buying independently.

‘Help to Buy is indeed helping first time buyers get onto the housing ladder, but these figures suggest that they may be paying more than the property is worth in order to get the help they need to raise a deposit,’ said Rob Houghton, chief executive officer of ReallyMoving.

‘This could be either because developers are charging a premium or because first time buyers are encouraged to buy a more expensive property because the scheme gives them greater spending power,’ he explained.

‘Either way, when they come to sell, they may find their property is worth less than they paid for it, made worse by the fact they could be competing with other new developments nearby that are available with Help to Buy, while their own property is no longer ‘new’ and therefore ineligible for the scheme,’ he pointed out.

‘I urge those using Help to Buy to consider how long they intend to hold the property, whether they can afford the loan repayments on top of their mortgage and how easy it will be to resell,’ he added.