Conservative housing policy: helping or hindering millenials?
“We’re investing £44 billion to reach an average 300,000 new homes per year” was the Conservative government pledge during the 2017 Autumn Budget.
What help does the Conservative government offer first time buyers?
First time buyers as well as homeowners looking to move can apply for a help to buy equity loan. To be eligible, you:
- need a 5% deposit
- must buy a new build home costing less than £600,000.
- can’t sublet this home
- can’t own any other property at the time you buy your new home.
The government lends up to 20% of the property price. Then after five years you have to start paying interest on the loan.
Help to Buy ISAs are also available if you’re a first-time buyer saving for a mortgage deposit. You can earn interest tax-free and then the state boosts your savings by an extra 25%. The maximum government contribution you can get is £3000.
To be eligible, you:
- must be a first time buyer and not own a property anywhere in the world
- not have an active cash ISA in the same year
- buy a property costing less than £250,000 (£450,000 in London) which will be the only home you will own
- buy your home with a mortgage
- must open one before December 2019.
Do these Conservative measures really benefit first time buyers?
Whether the Help to Buy schemes benefit young first time buyers is questionable. Housing charity Shelter analysed the schemes’ impact and found that on average they had added around £8250 to the average property price.
And when it comes to the stamp duty change, probably not.
The Independent Office for Budget Responsibility calculated removing stamp duty would increase house prices by 0.3% and benefit just 3,500 first time buyers. The OBR predicted that first time buyers would end up paying more for a home because of the price increases.
Alex McCallum, Senior Analyst at Shelter said:
The government could have simply spent the money saved on building homes themselves, (at a cost of £170,000 per unit) they could have delivered 18,800.
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