The scheme (not to be confused with FirstBuy, another, marginally different Government scheme) is the pet project of housing minister Grant Schapps and communities and local government secretary Eric Pickles, and was first mooted back in the autumn. The idea is that housebuilders will pay 3.5% of the sale price of the property into an account at whichever bank supplies the mortgage. The Government will then guarantee another 5.5% of the price, which will only be called upon if there’s a major crash in house prices.
For the Government, it’s win-win: not only will the scheme help youngsters get on the first rung of the ladder, but it’ll also give a boost to housebuilders, who complain that while they’ve got the land and ‘queues’ of keen potential buyers, many of their customers are struggling to save up the £20,000 plus needed as a deposit for a mortgage. A side-effect should also be to rebalance the rental market, which is becoming increasingly expensive as new buyers are priced out of the market.
Or that’s the idea. Critics aren’t terribly impressed with the plans: the usual arguments about offering high loan-to-value mortgages aside, they argue that this will help builders more than it’ll help buyers. That’s mainly because builders set the prices on new properties – so new-builds often lose a portion of their value once buyers move in and the market has its own say on the value of the property, which isn’t good for buyers.
There are were also – understandably – worries over Government meddling with (or simply ignoring) market forces. In fact, Government schemes like this rarely work out. Also, as Telegraph columnist Ian Cowie pointed out, the scheme may actually reverse its desired effect: if it’s as popular as the PM wants it to be, it will drive up demand, thus driving up prices, thus making it even harder to buy a house. ‘Consider the words of an earlier Conservative Prime Minister, Margaret Thatcher… who simply said: "You can’t buck the market",’ pointed out Cowie. Indeed.
So could this be a case of something looking too good to be true? ‘ "Caveat Emptor" would be my advice to anyone thinking of buying a new build today using the NewBuy scheme,’ reflected property expert Henry Pryor on his blog today. And when even the industry’s proponents are advising caution, that’s got to be cause for concern.