In the first half of 2013, the number of new homes being built in the UK reached a five-year high, a figure buoyed by the government’s increased attempts to boost economic growth through the new housing market.
Yet at the same time, house prices are continuing to rise. The Office for National Statistics (ONS) have recently announced anincrease in the year to June prices for 2013 of 3.1%, whilst IHS Global Insight predict that house prices willincrease to a massive 7% by the end of 2014.For those that harbour aspirations of house ownership but are struggling to buy now, the dream might be starting to go further from their grasp.
However to help fill the increased number of new builds, house builders in the UK are beginning to offer a range of incentives to ease the financial burden for many people. Here are five of the best.
Shared equity schemes
Marketed with supportively comforting names such as Step Up and Helping Hand, these schemes work in a very similar manner to the government-backed programme, First Buy. Typically they involve the home builder fronting an equity loan of between 10-20% , and then facilitating a reduced deposit of around 5% that the buyer has generated alongside the remaining 75-85% of the value of the house by securing a mortgage through the normal channels.
House prices in the UK are currently set at an average of just under £240,000. Using this benchmark, a potential buyer using a shared equity scheme set at 15% would need only a deposit of £12,000 and a mortgage of £192,000. Whilst the home builder subsidies the remaining £36,000 to be paid back interest free within a set time period (usually 5-10 years).
If you consider that the average deposit for first-time buyers in London is just over £64,000, the scope for broadening people’s access to the property market using shared equity schemes is significant.
Stamp duty paid
The home buyer is eligible to pay Stamp Duty Land Tax (SDLT) for every house purchased over £125,000 in the UK. There are different scales, according to the price, and they go up in large segments. For example, a house costing £250,000 will be subject to a charge of 1% stamp duty, while a house costing just one more pound will be subject to a charge of 3%. This presents a potential jump in duty of £5,000, from £2,500 to £7,500.
Stamp duty, therefore, can represent a significant outlay to factor into your budget – and one that is commonly overlooked. To help, a number of new home builders are offering to pay stamp duty for new homebuyers, in order to cut their customers costs and support their bid to sell more houses.
For current homeowners that are looking to move up the property ladder, assisted selling, now offered by a variety of home builders, provides a hassle free service for people that are struggling to sell their current abode.
It involves establishing a fair price for your property by arranging for independent valuations, calculating an average and comparing it against the minimum sum you would be prepared to accept. Most home builders will then market your house for you using respected estate agents within their network, maintaining a consistent dialogue with the sales team in order to try and achieve as quick a sale as possible.
In the vast majority of cases the service is free, and once a realistic fee for your current home is established, homebuilders will allow you to reserve a new home to move into once the process of selling your current home is resolved.
Part exchange is offered by new home builders who are prepared to purchase your current home from you and then sell it on themselves, and is another incentive with the design of helping current homeowners to move up the housing ladder.
The massive advantage to this scheme is that you are able to buy and sell quickly and easy, without the hassle of dealing with estate agents and potential buyers within property chains. As moving house is top of many people’s list of most stressful life events, the opportunity to minimise the level of upheaval is a welcome benefit for many.
NewBuy is a new scheme government-backed scheme announced during the recent budget and rolled out across England thereafter. It works by allowing homebuyers to only commit to a deposit of 5% for any property costing up to £500,000.
The incentive involves the government working in conjunction with participating home builders including Linden Homes and high street mortgage lenders Halifax and the Nationwide. Newbuy allows new home owners to secure a mortgage with such a small deposit, as the government protects lenders against losses incurred by homeowners who renege on their repayments. The scheme, however, is only open to full ownership deals so cannot be used in conjunction with shared equity loans.
If you have been able to buy a new home with the aid of one the incentives discussed, please share your experiences in the comments section below.