Your First Home scheme could leave FTBs unable to sell, property expert warns
Nathan Khider stated that buyers could pay a premium for a new-build property and face negative equity if they needed to sell within a few years.
The Government’s ‘Your First Home’ scheme could leave first-time buyers (FTBs) struggling to sell, Nathan Khider, founder of Nathan K Real Estate has warned.
The 2.5% deposit scheme will provide eligible buyers with a 20% equity loan, including an initial interest-free period.
Khider said: “I’m uncomfortable with what they are trying to introduce because I’m not convinced this is really geared towards helping first-time buyers.
“You’re telling someone who has been desperately trying to get onto the property ladder that they suddenly only need a 2.5% deposit. Of course that’s going to be attractive.
“But they can only use it on a new build, and that’s where I have a problem.”
Khider added: “There’s a reason why so many of these new builds are sitting empty. In my opinion, a big part of the problem is the price.
“Developers aren’t able to sell them for the prices they originally expected.
“Normally, if something isn’t selling, eventually the price has to become more realistic.”
He said: “My concern is that instead of allowing that to happen, this scheme brings in first-time buyers who only need to find a 2.5% deposit.
“For someone desperate to get onto the property ladder, they need to ask themselves why that property hasn’t already sold and whether they’re paying the right price for it.”
He stated that buyers could pay a premium for a new-build property and face negative equity if they needed to sell within a few years.
He said: “My concern is that you could be putting first-time buyers into new-build homes that depreciate straight away.
“If you pay the full asking price and then need to sell two or three years later, you will more than likely find yourself in negative equity and unable to sell it for what you originally paid.
“If there’s a big negotiation on the purchase price and you’re getting a genuinely good deal, that’s different. But I don’t think we can assume that’s going to happen.”
He added: “First-time buyers just want to own a home. If someone tells them they only need to find 2.5%, there’s a risk they focus on getting through the door rather than whether they’re paying the right price.
“It helps the developers. They sell the properties, get their money out and can go and build more. There’s nothing wrong with that.
“But what I have a problem with is portraying that as automatically helping the first-time buyer.”
He said: “The buyer is still taking on a mortgage, and the Government’s 20% is an equity loan. It isn’t free money.
“For someone who stays in the property for the long term, that could be a very different situation.
“But what happens if that first-time buyer needs to move again after two or three years and the property isn’t worth what they paid for it? That’s the risk I don’t think we should overlook.”
Khider noted that further Stamp Duty relief or other incentives could allow FTBs to keep more of their savings and choose a property that suited them and their family, rather than limiting support to new builds.
He said this could also support the wider property market by helping buyers move through the chain.
He added that the scheme appeared short-sighted and that more consideration should be given to buyers’ financial position when they later needed to move.
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