FTB support welcome but underwhelming

WHAT CHANGED

The government’s Your First Home scheme is designed to lower barriers to homeownership while providing additional support to the new-build market. First-time buyers are expected to be able to purchase with a 2.5% deposit, supported by a 20% government equity loan, with the balance funded through a mortgage. The scheme will be subject to household income and local property-price caps.  

WHAT THIS MEANS

Housebuilders certainly think demand-side support is needed. Almost 94% of respondents to our latest quarterly survey agreed that buyer incentives are vital to getting the market moving, while around 70% said it would give them greater confidence to bring sites forward. The big question is how far Your First Home reaches. 

The income limits of £110,000 outside London and £140,000 in London suggest a potentially broad pool of eligible households, including many dual-income professional buyers, but with confirmed funding in place of £4.7 billion - less than 20% of the total lending handed out over the life of the previous government’s Help to Buy policy – the government expects just 70,000 first-time buyers to take advantage of the scheme. 

Reflecting this, the Office for Budget Responsibility said it expects the package “to only have a marginal impact on house prices and supply given its limited overall size.” Applicants must buy a home worth less than £650,000 in London and £500,000 in outer London, with other areas to be set based on local prices. 

Overall, while the funding structure looks largely supportive for demand, the scale of funding announced implies that this doesn’t meaningfully improve sector sales rates and recovery prospects. Affordability improvements will therefore continue to be driven by gilt yields. 

Any impact on institutional acquisition opportunities is likely to be gradual, however, reflecting the time required for changes in land acquisition and development strategies to feed through, as well as the limited nature of the scheme. Bulk sales are also now a more established part of housebuilder delivery models, with SFH increasingly viewed as a strategic route to market rather than simply a response to weaker private sales. Its ability to accelerate delivery and de-risk larger sites remains attractive, even alongside targeted first-time buyer support.

BOTTOM LINE 

FTB deposit support in the UK Budget is expected to account for ~1% of new build volumes per annum, any housing recovery will continue to be shaped by rates.