First-time buyers on the lookout for a new home may find it cheaper to simply avoid using the government’s Help to Buy Equity Loan scheme, according to a survey by price comparison site ReallyMoving.

A first-time buyer using Help to Buy would find themselves paying an average of £303,000 in February 2019 on a new home, compared to £270,000 for a first-time buyer not relying on the scheme.

This disparity results from first-time buyers having had to pay an average premium of 12 per cent when making purchases through the scheme in February 2019, when compared to first-time buyers who never joined the scheme.

Help to Buy is typically sought after by first-time buyers as a means to help them get a foot on the housing ladder, but strong demand for the scheme could actually be making it more costly, and the research raises the question of whether or not developers are charging higher prices on homes enlisted in the scheme.

First-time buyers dominate

ReallyMoving revealed this extra cost, after the government reported that it estimated Help to Buy had helped as many as 400,000 people onto the housing ladder.

First-time buyers were estimated to have accounted for as much as 57 per cent of total homebuyer activity in the UK in early 2019, according to ReallyMoving.

During this period of first-time buyer dominance, the Help to Buy Equity Loan premium also reached a record high, rising from just 7 per cent in August 2018 to an average of 12 per cent by February 2019.

As many as 18 per cent of first-time buyers expressed the intention of building an entirely new home instead of seeking a pre-existing or second-hand one, according to ReallyMoving.

Possible problems selling

Rob Houghton, CEO of ReallyMoving, said: “Help to Buy is indeed helping first-time buyers get onto the housing ladder, but these figures suggest that they may be paying more than the property is worth in order to get the help they need to raise a deposit.”

Explaining the added costs associated with the scheme, he claimed: “This could be either because developers are charging a premium or because first-time buyers are encouraged to buy a more expensive property because the scheme gives them greater spending power.”

Houghton acknowledged that first-time buyers resorting to the scheme could find potential problems when finally deciding to sell, saying: “They may find their property is worth less than they paid for it, made worse by the fact that they could be competing with new developments nearby that are available with Help to Buy, while their own property is no longer ‘new’ and therefore ineligible for the scheme.”

The government has proposed the scrapping of Section 21, which entitled landlords to make ‘no-fault’ evictions. This move could potentially create indefinite tenancies, according to the National Landlords Association (NLA).

For many years, landlords have been allowed to use Section 21 notices during evictions, which did not require them to state a clear reason for wishing to take possession of property from tenants. Under new proposals, landlords would find they have to give valid reasons for seeking to evict their tenants.

Under the new proposals, landlords would not be able to evict a tenant without reason after a fixed-term tenancy had concluded. Tenants would no longer face eviction at short notice as a result. Landlords currently make use of Section 8 notices to evict tenants for breaching terms of a tenancy.

The proposals come after a campaign calling for the scrapping of Section 21 by pressure group Generation Rent.

Dan Wilson, director of Generation Rent has claimed: “Tenants have a right to a safe home, but can only exercise it if the government stops landlords from evicting without reason.”

New deal for renters

Communities secretary James Brokenshire announced the new government proposal, saying: “The private rented sector has grown rapidly over recent years, with more than four million people now living in privately rented accommodation…yet the housing market has not kept pace with the changes in society and leaves many tenants feeling insecure.”

“The proposed measures will provide greater certainty for tenants”, he added, “and make the housing market fit for the 21st Century, whilst creating a more secure rental market for landlords in which to remain and invest.”

Onus on government

The NLA, who are critical of the moves, claimed landlords are forced to turn to using Section 21, as they have “no confidence” that the courts can handle Section 8 applications “quickly and surely”.

Richard Lambert, CEO of the NLA, commented: “England’s model of tenancy was always intended to operate in a sector where Section 21 exists. This change makes the fixed term meaningless, and so creates a new system of indefinite tenancies through the back door.”

Lambert put the onus on the government, saying: “It’s entirely on the government’s ability to re-balance the system through Section 8 and court process so that works for landlords and tenants alike … if the government introduces yet another piece of badly thought-out legislation, we guarantee there will be chaos.”