Today David Cameron announced plans for 200,000 ‘starter homes’ to be built over the next five years to help boost social mobility, and make it easier for young families to get onto the property ladder.
“When a generation of hard-working men and women in their 20s and 30s are waking up each morning in their childhood bedrooms – that should be a wake-up call for us,” He said.
David promised to introduce more flexibility into the housing system by changing the planning rules in England, so that developers can build affordable homes for purchase and not just to rent.
Countrywide’s Research Director Johnny Morris comments further on this “Getting more homes built is an important part of the solution to our housing troubles, and the government’s focus on the issue is welcome. Undoubtedly an additional 200,000 discounted starter homes will help aspiring buyers into ownership sooner, and we hope the government’s plans will enable house builders to bring forward new home developments that would previously have been unviable.’
Under the new scheme ‘starter homes’ will be offered to first time buyers under the age of 40 at 20% below the market value. However, those that purchase under the scheme will be prohibited from selling them at full market value for at least five years.
Commenting further on the proposal Johnny Morris argues that the 20% discount doesn’t help enough with one of the biggest challenges for first time buyers, saving a large deposit. Johnny goes on to say “even with the discount, a first time buyer purchasing a £250,000 starter home with a 90% LTV mortgage would still need to raise a £20,000 deposit (versus £25,000 without the discount). This isn’t the difference between buying or not buying, rather how long it takes to save, especially in areas where house prices are higher. It will mean a typical first time buyer couple would be able to buy a year sooner”
As part of Cameron’s speech, he stated that banks will be required to make it easier for people to get mortgages and that councils and government departments are to release land for development.
House builders will be able to sell these ‘starter homes’ at a discounted price as they will be exempt from a number of levies previously in place.
The starter scheme forms part of David Cameron’s vow as part of his last term as prime minister for this to be “a defining decade for our country”.
Is this strategy a little two ambitious we ask? “The target to build 200,000 starter homes, and earlier announcements to build a total of 1 million homes by 2020 are extremely ambitious. To get to these numbers by 2020 we would need to double our house building to 250,000 a year. In order to get there, building would have to grow every year at rates not seen for over 25 years, 15% each year up to 2020. There simply isn’t a wide enough variety of developers, or homes being built. Not to mention issues with skills and materials shortages. To reach their targets the government will have to get homes of all tenures (not just homes to buy) built by a larger number of smaller house builders, institutional private rented sector investors, housing associations and councils.” Johnny Morris, Research Director, Countrywide PLC.