LISA House Price Limit

dogun

Hi all,

The current house price limit for purchasing a house with funds from a LISA is £450k. With soaring house prices and the cost of living crisis, is it expected that this house price limit will be increased?

For those of us in the South (definitely London!) you'd be extremely lucky to get a 2 bedroom house for this price.  It means most first time buyers either have to move away from where they know/love/work, buy something tiny or keep the funds in there until retirement despite needing it now for their first home. 

masonic

I think it is more likely that house prices will crash than the limit increase. With interest rates rising rapidly, this is a distinct possibility.

The good news is that according to Rightmove there are currently 3,832 2 bedroomed properties listed for sale in London with an asking price of £450k or less, increasing to 9,078 properties with 1-2 bedrooms. The scheme was designed for first time buyers to be able to take their first step on the property ladder, and was never intended to guarantee you could afford a property in a particular postcode.

Albermarle

dogun said:

Hi all,

The current house price limit for purchasing a house with funds from a LISA is £450k. With soaring house prices and the cost of living crisis, is it expected that this house price limit will be increased?

For those of us in the South (definitely London!) you'd be extremely lucky to get a 2 bedroom house for this price.  It means most first time buyers either have to move away from where they know/love/work, buy something tiny or keep the funds in there until retirement despite needing it now for their first home. 

Most potential first time buyers in the South or anywhere else, can not afford to pay £450K anyway, regardless of whether they have a LISA or not. A first step on the property ladder for the large majority, is more likely to be something small, that is not in an ideal  location, and costing less than £450K.

dogun

Albermarle said:

dogun said:

Hi all,

The current house price limit for purchasing a house with funds from a LISA is £450k. With soaring house prices and the cost of living crisis, is it expected that this house price limit will be increased?

For those of us in the South (definitely London!) you'd be extremely lucky to get a 2 bedroom house for this price.  It means most first time buyers either have to move away from where they know/love/work, buy something tiny or keep the funds in there until retirement despite needing it now for their first home. 

Most potential first time buyers in the South or anywhere else, can not afford to pay £450K anyway, regardless of whether they have a LISA or not. A first step on the property ladder for the large majority, is more likely to be something small, that is not in an ideal  location, and costing less than £450K.

The demographic of the average of first time buyer is changing. First time buyers are getting older and with that possibly comes lifestyle changes like having children. With that being said, not all first time buyers are looking for a 1 bedroom flat to start them off. Take a 35 year old first time buyer that has been saving since age 20, and is now married with 2 children. Why should they not benefit from the same scheme that a 25 year old single person does? 

The point to my question is, what you could purchase with £450k when the scheme started is significantly different from what you can purchase now. The price limit should really move in line with at least HALF the average house price increase is in that time. 

masonic

dogun said:

Take a 35 year old first time buyer that has been saving since age 20, and is now married with 2 children. Why should they not benefit from the same scheme that a 25 year old single person does?

I'd question whether it is them who would benefit from the scheme even if they were able to use it. The real beneficiary of the scheme is the person who ends up with the money, namely the seller of the property. The seller is able to achieve a better price due to the scheme driving competition for qualifying properties. It was launched at a time when the property market was looking somewhat wobbly and certainly helped to prop house prices up. If you are looking at properties that do not meet the eligibility criteria, then you are likely at an advantage through having less interest in that section of the market and could therefore get better value for money than if the scheme rules were expanded to include those properties. It is therefore very difficult to say whether or not you would be better or worse off. Arguably, all first time buyers today would be better off if the government of the day didn't waste resources on schemes designed to prop up house prices and appease middle class voters and rather invested much more heavily in ensuring more homes were being built to meet demand.

Regarding the scenario specifically, there are of course people in their early 20s who are married with 2 children, so I don't think age really comes into it, other than that an older person has potentially had more time to save than a younger person. There are lots of ways the scheme could have been better targeted to those with a genuine need for help, such as means testing, regional house price limits that were set at a modest level and then index linked. After all, it isn't fair that an orthodontist earning £100k/pa could use the scheme to buy a 5 bedroom manor house in Barnard Castle. However, that wasn't how it was done. Like the £20k ISA limit, there is no sign that the £450k house price limit will be uplifted any time soon.

3Dwarves

dogun said:

The point to my question is, what you could purchase with £450k when the scheme started is significantly different from what you can purchase now. The price limit should really move in line with at least HALF the average house price increase is in that time. 

I completely agree with that. What £450K used to buy when the scheme started and now are two totally different things. Say the person's salary has increased as well during the time of saving, so with LISA and a good salary, why woudn't it be possible?

3Dwarves

masonic said:

dogun said:

Take a 35 year old first time buyer that has been saving since age 20, and is now married with 2 children. Why should they not benefit from the same scheme that a 25 year old single person does?

I'd question whether it is them who would benefit from the scheme even if they were able to use it. The real beneficiary of the scheme is the person who ends up with the money, namely the seller of the property. The seller is able to achieve a better price due to the scheme driving competition for qualifying properties. It was launched at a time when the property market was looking somewhat wobbly and certainly helped to prop house prices up. If you are looking at properties that do not meet the eligibility criteria, then you are likely at an advantage through having less interest in that section of the market and could therefore get better value for money than if the scheme rules were expanded to include those properties. It is therefore very difficult to say whether or not you would be better or worse off. Arguably, all first time buyers today would be better off if the government of the day didn't waste resources on schemes designed to prop up house prices and appease middle class voters and rather invested much more heavily in ensuring more homes were being built to meet demand.

Regarding the scenario specifically, there are of course people in their early 20s who are married with 2 children, so I don't think age really comes into it, other than that an older person has potentially had more time to save than a younger person. There are lots of ways the scheme could have been better targeted to those with a genuine need for help, such as means testing, regional house price limits that were set at a modest level and then index linked. After all, it isn't fair that an orthodontist earning £100k/pa could use the scheme to buy a 5 bedroom manor house in Barnard Castle. However, that wasn't how it was done. Like the £20k ISA limit, there is no sign that the £450k house price limit will be uplifted any time soon.

I was going to write something else, but changed my mind. The whole situation is depressing. You're free to indebt yourself for life to buy a mouldy, small flat, that won't even serve your needs and will probably need at least another £100k in renovation and upgrade to be inhabitable.