Most new-build homes fail Your First Home scheme price caps

Most new-build homes fail Your First Home scheme price caps

A recent study reveals fewer than a third of new-build homes in England meet the price caps set by the government’s Your First Home scheme, limiting options for first-time buyers.

Fewer than 30% of new homes sold across England would qualify for the Your First Home scheme, which offers first-time buyers a 2.5% deposit and a 20% government equity loan on new-build properties under local price caps. The scheme’s restrictions mean many buyers face limited choices, particularly in high-cost areas where typical new-build prices far exceed the caps.

The scheme is due to come into effect next year, aiming to assist first-time buyers with lower upfront costs. However, a study by SAM Conveyancing, analysing new-build sales over the past two years, shows that in 264 of 285 local authorities, fewer than half of new builds fall under the price caps. In 97 authorities, fewer than a quarter qualify.

Study findings highlight regional disparities in new-build affordability

The analysis identifies Oxford as the worst-affected area, with no new-build homes sold in the last two years priced below the £415,000 local cap. The average new-build price there is £777,867, almost double the cap.

Other areas with very low qualifying shares include Worthing, where only one of 90 new builds meets the £300,000 cap, and Blackpool, with just one qualifying home out of 41 sold. Inner London boroughs such as Islington, Westminster, Hammersmith and Fulham, and Kensington and Chelsea also show very low proportions of qualifying new builds, all under 6%.

Conversely, some districts offer more options. Melton in Leicestershire leads with 35% of new builds under its £300,000 cap, translating to about 90 qualifying homes sold annually. Mid Suffolk, Preston, South Norfolk, and Bassetlaw also rank highly for qualifying homes per population. Liverpool sells the most qualifying new homes overall, with 73% of new builds under the city’s £235,000 cap.

Implications for landlords and letting agents in the private rented sector

The Your First Home scheme’s focus on new builds and strict price caps will affect the rental market indirectly. With limited affordable new-build options for first-time buyers, demand for private rented sector properties may remain strong, particularly in areas where homeownership remains out of reach.

Landlords and letting agents should be aware that in many local authorities, first-time buyers will continue to rely on the rental market due to the scarcity of qualifying new homes. This could sustain rental demand and potentially support rental income stability in certain regions.

However, the scheme’s limitations may also influence new-build development patterns. Developers might price new homes to match market demand rather than the caps, reducing the supply of affordable new homes and pushing more prospective buyers into the rental sector.

Background on Your First Home scheme and market context

Your First Home is a government initiative designed to help first-time buyers get on the property ladder with a reduced deposit and an equity loan on new-build homes capped at local authority price limits. It replaces previous schemes like Help to Buy, aiming to improve affordability.

However, restricting the scheme to new builds and imposing price caps means many areas with high property prices offer little relief to buyers. Past experience with Help to Buy showed that developers often increased prices in response to such schemes, limiting their effectiveness in improving affordability.

The scheme’s mortgage payments are also expected to rise after the initial five-year interest-free period, which could affect long-term affordability and buyers’ ability to transition from renting to owning.

Practical considerations for landlords and letting agents

Landlords should monitor local housing markets to understand how Your First Home impacts demand for rental properties, especially in areas with low qualifying new-build proportions. This insight can guide investment and letting strategies.

Letting agents may see increased enquiries from prospective tenants who are unable to purchase due to the scheme’s restrictions. Advising clients on local housing options and potential future changes to the scheme will be important.

Both landlords and agents should keep abreast of developments regarding the scheme’s implementation and any adjustments to price caps or eligibility criteria, as these could influence market dynamics.

Uncertainties and what to watch for

It remains unclear whether the government will expand Your First Home to include existing properties or adjust price caps to better reflect local market conditions. Such changes could broaden buyer options and alter rental demand patterns.

The impact of rising mortgage costs after the interest-free period on buyers’ ability to maintain homeownership is also uncertain, potentially leading to increased rental demand if buyers are forced to sell or rent out their homes.

Landlords and agents should watch for official guidance and updates on the scheme, as well as market responses from developers and buyers, to anticipate shifts in the private rented sector.

What landlords should consider now

• Review local new-build market data to assess how many homes qualify under Your First Home caps and anticipate rental demand accordingly.
• Maintain records of tenant enquiries and market trends to inform portfolio management and investment decisions.
• Stay informed on government announcements about the scheme’s rollout and any potential changes affecting eligibility or pricing.
• Consider the potential for increased rental demand in high-cost areas where homeownership remains difficult.
• Engage with letting agents to understand tenant needs and market shifts related to the scheme.

Supporting landlords with compliance and market insight

The Landlord Association (TLA) offers membership that provides access to detailed compliance resources and market analysis relevant to evolving housing policies like Your First Home. Through TLA’s BETA testing platform ORBIT, landlords and letting agents can organise property records, monitor regulatory developments, and keep documentation up to date. ORBIT’s tools for recording inspections, repairs, and communications help maintain evidence of compliance and support informed decision-making in a changing market.

Exploring TLA membership and ORBIT BETA access can assist landlords in adapting to new schemes and understanding their impact on rental portfolios. This support is particularly valuable as government initiatives continue to influence housing supply and demand.

Looking ahead, landlords and agents should remain vigilant for further policy updates and market responses to Your First Home, as these will shape the private rented sector’s dynamics in the coming years.

Sources: Letting Agent Today