Buyers Turn Towards Help to Buy - Urban Union Ltd


Surge in Demand for New Build Homes

Home buyers with low deposits are increasingly turning towards Help to Buy after banks continue to withdraw mortgage products.

Stats released by Zoopla this week show that demand for new homes is highest in the North East, at 139% above the level of demand seen the beginning of March, whereas demand for exiting properties in this region was up by just 72.5%. This demand (measured by a combination of inquiries and browsing) for new-build homes from first time buyers is up 87% since March. Demand for new builds is 66% higher across the UK, whereas demand for existing homes is up by 46%.

Scotland recorded a 33% increase in demand, even though the market remained closed until 29th June, but we expect to see a surge in demand that will exceed England’s figures due to the affordability of good quality homes in Scotland, especially now that the market here is open and banks continue to limit access to mortgage products.

Buyers locked out of the market

This rise in demand for newly built homes is largely due to first-time buyers being locked out of the general market because lenders are withdrawing mortgage products for buyers with low deposits. These buyers are now looking at the new build market where they can purchase a home with just a 5% deposit using the Help to Buy scheme.

Mortgage providers have withdrawn these products because should house prices drop, even in the short term, this could push highly leveraged buyers into negative equity. Several lenders are offering mortgages with a minimum of 15% deposit required as opposed to the 5% deposit required before the pandemic. This change will affect first time buyers who could potentially shut out of the market for the foreseeable future.

This change disproportionately affects anyone who is trying to get onto the property ladder, and unless first-time buyers have cash reserves, they are effectively shut out of the market.

What is Help to Buy?

The Help to Buy (Scotland) scheme enables those who want to buy a property to do so with just a 5% deposit. Help to Buy (Scotland): Affordable New Build and Smaller Developers Schemes have now been extended to March 2022 with an additional £55 million provided in 2021/22. This additional funding means that the government can help another 2,000 households to buy new-build homes.

Under the scheme buyers can borrow an equity loan from the Government up to an additional 20% of the property’s value meaning they can buy with a mortgage that covers 75% of the house price.

Demand is higher in areas where property is cheaper – and during the lockdown developers have been able to continue to sell property as they were already well-adapted to using virtual viewings and CGI imagery, and reservations could still be taken. This has resulted in a greater degree of activity compared to existing homes that could not take viewings or go on the market.

If you are considering taking advantage of the Help to Buy scheme, take a look at the current availability in our Perth, Glasgow and Edinburgh developments.