The government is cooking up another program for first time home buyers in the UK. In this proposed program- called the “starter home initiative”- 200,000 lucky first time home buyers will be given a £141,000 government subsidy for their first property.
The Office of National Statistics say that an average house costs about £297,000, but under the initiative it can be sold to first time home buyers at £238,000.
This huge discount for first home buyers is possible, because the “starter home initiative” allows developers to refurbish and sell previously rented homes at a 20% discount.
While there seems a lot of “pros” for first time home buyers in this setup, not everyone is happy about this initiative.
Aside the huge discount given to first home buyers, the same initiative also states that houses bought under this scheme can be sold at the market rate after 5 years.
Generation Rent, a lobby group in the UK, explains that original buyers may abuse this power and later sell the house at an unreasonable rate – making it harder for first time home buyers to enter the property market.
Here’s a short explanation: in case the first buyer purchases a property for £238,000 like in the example I gave earlier, the same property could be sold for £379,000 five years later (provided house prices continue to rise at 5% a year). The buyers then have the potential to earn £96,000 in a few years from availing of the program.
Shelter, a housing charity, also shares the same concern. They are afraid that by 2020 more than half of the country’s property for sale would be too expensive for families earning average wages.
Campbell Rob, Shelter’s Chief Executive, explains that there are a lot of advantages for people who will be selected from the program but other buyers who are left out will have an even harder time buying a house for their family.
These are pretty gloomy predictions, but there’s still hope. An expert in unique property investment, Rick Otton, suggests an alternative solution for those who will not be selected to receive the benefit.
“I started my career in property during the savings and loans crisis in the United States. It was an environment where people just wanted to get away from all their unpaid home loans, so I learned quickly that to get sellers to sell, I should offer or negotiate a solution for the seller’s problem, “ said Mr. Otton.
“Let’s say the seller you’re talking to is in debt. Then you should be talking about how he or she can get rid of the debt and not about the house, because the seller’s problem is how he can free himself from all the payments he can’t make,” he added.
Mr. Otton explains further that if first time home buyers present an opportunity to sellers, they can find a way into the property market. Going by that premise, any buyer may create opportunities for themselves by negotiating for the best terms to benefit both parties. So really, you won’t need to put your hopes solely on the government’s programs.
If you are fortunate enough to benefit from the Starter Home Initiative, great, take advantage of the opportunity. If not, there’ll always be another solution to buy a house.Tags: buying houses, first time home buyers, first time home buyers in the UK, property for sale, starter home initiative