By June 23, 2013 Read More →

Affordable housing gives first time buyers a leg up onto the ladder

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Two thirds of affordable housing sales accounted for by first time buyers

This review of ‘Affordable’ Housing looks at the low cost home ownership (LCHO) sector and, in particular, affordable housing schemes covering shared ownerships, shared equity, resale price covenants and other LCHO arrangements. Data is from the Halifax housing database for the period 12 months to April 2013, the CML, the HMRC and the department of Communities and Local Government (CLG)

First-time buyers remain the biggest beneficiaries of affordable housing schemes, accounting for 65% of purchases over the last year, according to Halifax’s latest Affordable Housing Review.

This is significantly higher than the 40%1 of all home purchases made by first-time buyers over the same period. Overall, there were 14,7372 purchases of homes made by all buyers under the various shared equity and shared ownership schemes in 2012/13.

The schemes have particularly helped younger buyers, with 40% of all affordable home buyers in the age band 20 to 29; a significantly higher proportion than in the market as a whole where they make up 25% of all housing sales.

However, in spite of the success of affordable housing schemes amongst this group, there is a lack of understanding of the support available to first-time buyers through the Government initiatives such as NewBuy and Help to Buy. Less than a third (30%) of 20-45 year olds have welcomed the initiatives or think they work at encouraging and helping people to get on the property ladder3.

Craig McKinlay, Halifax Mortgage Director, says: “Many of the affordable home ownership schemes available have been designed specifically to help first-time buyers get on the ladder and boost new build sales. They can help people realise their ambitions to become homeowners, whilst also providing the potential to boost levels of housebuilding, which could help to alleviate housing supply issues.

“The recent introduction of the Help to Buy equity scheme may well play an important role in meeting demand by targeting all buyers, not just those buying for the first-time. The Help to Buy mortgage guarantee, to be launched in January 2014, will also extend assistance to buyers looking to purchase existing properties as well as new builds.”

Halifax has looked at the typical profile of someone buying a home under ‘affordable’ housing schemes which include shared ownership, shared equity and other low cost house purchase arrangements.

Average price of properties bought under affordable homes schemes

The average price paid for properties purchased under the various affordable housing schemes in Britain is £167,9554. This is 10% lower than the £185,324average for all house purchases.

Regionally, the highest average price paid by purchasers using these schemes is in London (£228,560) whilst the lowest is in the North East (£132,483). In London, the average value of a property sold in a scheme is 25% lower than the regional average for all housing transactions.

The average price paid by FTBs using the schemes is £141,245; this is just under the average price paid by all FTBs (£142,839) for all housing. Despite the lack of difference in prices at the UK level, FTBs in London  pay an average price under these schemes that is a fifth lower (21%) than the average price paid by all FTBs in the capital (£201,208 against £256,154).

New Build

In the past 5 years many of the schemes under the umbrella of affordable homes have been designed not just to help FTBs purchase homes, but also to stimulate the new build sector. In the year to April 2013, 75%4 of properties bought under affordable home ownership arrangements were newly built properties.

Geographical Comparisons

16% of all affordable housing transactions in the 12 months to April 2013 were in the South East followed by Scotland (14%), followed by North West, the South West and West Midlands (10%). These figures mirror the geographical distribution for all housing transactions; for example, 18% of all property sales are in the South East.

Incomes

The average gross annual income of an affordable home buyer is £28,3505. The average income of those buying under these schemes is £4,344 (13%) lower than the average earnings for those in full time employment (£32,6946). Regionally, the average income of buyers under these schemes varies from £46,721 in London to £24,518 in North West.

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Danny Wilson is an expert on all aspects of personal finance and has worked in the industry for long enough to know better....

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