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Government Offer 20% Discount to All First-time buyers

Written by Sam Jones on 01 March 2015.

The Government's plans to offer a 20% discount to all first time buyers launched this weekend allowing first time buyers in England, under the age of 40 to register to buy new homes for 80% of the market value.

The offer is part of the government's new "starter homes" scheme to encourage home ownership and construction on previously used "brownfield" land.

The government hopes 100,000 new houses will be built specifically for first-time buyers by 2020.

The plans are likely to accelerate the current new home building programme, which has seen the number of new houses built in England last year rising significantly. According to Government figures a total of 137,000 homes were started in 2014, a rise of 10% on the previous year, according to the Department of Communities and Local Government (DCLG).

The number of homes being completed rose to 118,760 - up 8% on 2013.

The industry has welcomed the rise in new homes, but said it was still "way short" of what the country needs. However the figures also show that the number of homes being started declined sharply in the final quarter of the year. In 2014 house-building was still 25% below the peak reached in 2007. The housing charity Shelter said it was particularly concerned about the number of affordable homes being completed. "While a small increase in the number of homes built might be heralded as a success, the real story here is the shocking fact that we're building just half the homes we need in England," said Campbell Robb, the chief executive of Shelter.

The Home Builders Federation said that more than 100,000 extra people were now employed in house building, providing a boost to the economy.

Despite the increase and discounts to be made available, Labour said the plans would ring hollow for those priced out of the market and claims the Government has presided over the lowest levels of house building since the 1920s, causing home ownership to fall to its lowest level for three decades.

The 20% discount being offered to first time buyers is achieved by waiving local authority fees for homebuilders of at least £45,000 per dwelling on brownfield sites.

The government said there would be no compromise on quality or energy efficiency, but first-time buyers would have to repay the 20% price advantage if they sold within five years.

Housing minister Brandon Lewis: "It opens up an ability to own a home to a whole new group of people" He said an affordable house-building programme was beginning which had "the fastest build rate in about 20 years".

"And this new starter homes programme is another 100,000 homes on top of everything else that we're doing, allowing those first time buyers, people who want to own that home of their own, to be able to do that - a good design, well-built home, with a 20% discount.

This seems good news to first-time buyers who have put down larger deposits in January as stamp duty savings put more money into their pockets. The average first-time buyer deposit was £29,127, up 7% on December and 15% on one year ago. And the average first-time buyer house purchase price topped £160,000 for the first time on record. Yet first-time buyer completions fell 19% on a monthly basis, due to a dip in applications over Christmas, according to the latest First Time Buyer Tracker report from estate agents Your Move and Reeds Rains.

Revisions to the stamp duty slab system have cut upfront costs for many first-time buyers, allowing them to divert the savings into a deposit fund. The average first-time buyer would have been liable for stamp duty fees of around £1,600 under the old system, but this now has been reduced to £700, saving £900.

This has driven first-time buyer deposits to an 18-month high and lifted purchase prices to a new record. New buyers paid an average of £160,304 in January, 12% more than the £143,343 paid one year ago.

First-time buyer purchasing power is also increasing, as wages finally pick up in real terms, the report said.

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