First-time buyers in England offered 20% discount on new homes

topcat007

First-time buyers under the age of 40 in England can now register to buy new homes at a discount of up to 20% off the normal price.

http://www.bbc.com/news/business-31668135

Carl31

Yay, another hair brained scheme instead of tackling the real issues in the market


I suppose at least it signifies that relevant people agree that houses are at least 20% over priced

lukeh23

This is nothing more then a party desperate for votes, but out of ideas. It really shows how dire UK politics has become.

carlx

Carl31 wrote: »

Yay, another hair brained scheme instead of tackling the real issues in the market


I suppose at least it signifies that relevant people agree that houses are at least 20% over priced

How do you classify "overpriced"? The value of a property is largely set by demand and demand varies according to a multitude of variables, so the price of a house is in essence, never "overpriced" because it is only worth what somebody is able and willing to pay for it.

There is one quote as a child that i still remember, "Buy land, they're not making it anymore" - Mark Twain. and it applies to property as it becomes more difficult to build houses, value will of course increase.

Wealthier people want to earn more money, to support their families and have a more comfortable life - in recent decades this has seen many people buying "Buy to let" properties, increasing demand and forcing out lower income earners. But this isn't our biggest problem.

Our real problem is the lack of building new homes, this is confounded by an aging population who already own their own homes (more people now have a home with no mortgage than those with a mortgage)

We should be doing more building, we should be changing the mind set of people from "owning a house" to "owning an apartment" or going back to the days where most of us "rent" - apartment blocks were poorly designed and managed in the past but it is essentially the only realistic way to go as the problems increase, because with a lack of building, increased net migration, increased birthrates and an aging population, property prices will continue to increase.

lukeh23

One thing: how do they regulate the value to determine the 20% off? Whats to stop builders creeping the price up to swallow the discount? Seems flawed to me.

Carl31

carlx wrote: »

How do you classify "overpriced"? The value of a property is largely set by demand and demand varies according to a multitude of variables, so the price of a house is in essence, never "overpriced" because it is only worth what somebody is able and willing to pay for it.

There is one quote as a child that i still remember, "Buy land, they're not making it anymore" - Mark Twain. and it applies to property as it becomes more difficult to build houses, value will of course increase.

Wealthier people want to earn more money, to support their families and have a more comfortable life - in recent decades this has seen many people buying "Buy to let" properties, increasing demand and forcing out lower income earners. But this isn't our biggest problem.

Our real problem is the lack of building new homes, this is confounded by an aging population who already own their own homes (more people now have a home with no mortgage than those with a mortgage)

We should be doing more building, we should be changing the mind set of people from "owning a house" to "owning an apartment" or going back to the days where most of us "rent" - apartment blocks were poorly designed and managed in the past but it is essentially the only realistic way to go as the problems increase, because with a lack of building, increased net migration, increased birthrates and an aging population, property prices will continue to increase.

By overpriced, I mean the price is over what the target customer can afford to pay, hence it needs to be discounted to make it affordable and secure a sale


If they are appropriately priced, why is the discount needed?

carlx

Carl31 wrote: »

By overpriced, I mean the price is over what the target customer can afford to pay, hence it needs to be discounted to make it affordable and secure a sale


If they are appropriately priced, why is the discount needed?

They are trying to keep the economy growing while at the same time attempting to get that middle gray area of people who are stuck in a rental loop to step up and purchase property.

I guarantee that if the builder puts the house on at full price then they still get the sale - the only difference being they would then pay at least £45,000 per dwelling in fee's to the local authority.

The main thing is it's an election, they need to be seen to be building a stronger economy and this will get them votes, building houses creates jobs which will make their stats look great and get them votes, and while they do it, hopefully tap into that lost generation of renters and once again, try to get some votes.

The "real price" doesn't need to be discounted because there is enough demand for the properties, be it home owners or landlords who do the buying.

MARTYM8`

Carl31 wrote: »

Yay, another hair brained scheme instead of tackling the real issues in the market


I suppose at least it signifies that relevant people agree that houses are at least 20% over priced

Yes - they introduce FLS/Help to buy/QE that pushes prices up 20% - and now have schemes to give a select group of 100,000 under 40s a 20% discount to buy a home. Just comical. They really should just call it the help to buy votes scheme.

What is more ridiculous is that the 20% discount is not paid for by central government or the developers - but by local councils who won't be able to levy the CIL or section 106 sums they would normally get from developers. So enjoy your new 20% discounted flat - but don't complain if your kid can't get a local school place, there is no local library open or GP surgery or a play area/nursery or well maintained roads if you drive - cos the council won't have the money from the developers to provide them.

Anyone sick of these desperate schemes to buy votes from politicians. Why should poorer taxpayers subsidise the middle classes to get lower tuition fees or cheaper homes? Most young people still can't afford to buy even with a 20% discount on current 10 times salary prices - not forgetting new builds sell at a premium anyway normally!

ging84

I don't understand how it is going to work. One of the government publications says the section 106 costs they are waving is £15k per house, another £45k
But either way how on earth are they going to police this 20% discount on completely new developments. If the whole developments are going to be at a 20% discount, then where is the yard stick? And if the development is mixed of normal and starter homes, what is to stop builders pricing in a substantial discount being available on the normal homes, so the starter homes are priced 20% under the normal homes, but the starter homes sell at that fized price, no incentives, the others a 10-15% cash discount and 5% worth of incentives. Making basically the same. All they would need would be a couple of people on part exchanges where they can over value the old home and charge full price on the new, then they can say see these are at market value.

Graham_Devon

MARTYM8` wrote: »

What is more ridiculous is that the 20% discount is not paid for by central government or the developers - but by local councils who won't be able to levy the CIL or section 106 sums they would normally get from developers. So enjoy your new 20% discounted flat - but don't complain if your kid can't get a local school place, there is no local library open or GP surgery or a play area/nursery or well maintained roads if you drive - cos the council won't have the money from the developers to provide them.

Apparently they will still get the money - the subsidy is not actually reducing. This is all according to what I heard on 5 live when this was first announced.

Basically if there are 10 houses being built and the total subsidy is £100,000, each dwelling will pay £10,000 towards the subsidy. (things like size etc might mean a 4 bed pays more than a bed, but for the sake of simplicity, 10k each!)

If the government take away the need to pay the subsidy on 2 houses in that plot, all that happens is the other 8 houses have to pay more.

So now we have 8 houses paying £12.5k each.

We would likely, therefore, see the price of the other 8 houses therefore rise, to cover the extra they are having to pay on those houses. That will possibly drag the price of the 2 other houses, which now isn't paying the subsidy up also. So there will likely be a small increase in price due to this subsidy which the 20% is then taken from.

So basically it's a distribution thing.

Could be quite a cunning plan, as if you sell within 5 years, you need to pay the 20% back. So if the council have already got their money, who does that 20% go to? My bet would be a share between the builder and the government.

MARTYM8`

Graham_Devon wrote: »

Apparently they will still get the money - the subsidy is not actually reducing. This is all according to what I heard on 5 live when this was first announced.

Simply answer - put the kids of the beneficiaries at the bottom of the pile for school places and charge them extra for using local facilities like nurseries, play groups and libraries. Because their 20% discount is being paid for through the funds that pay for that?

And on your interpretation- doesn't that mean everyone else on the development pays more for their home?