The next PPI scandal? Help to Buy home owners ‘overpaying’ for their properties

First-time buyers are paying an 8% premium on Help to Buy properties compared with other new-builds.

Analysis by removals and conveyancing comparison website reallymoving.com – based on 70,000 first-time buyers using its service between October 2017 and July 2018 – found those purchasing a new-build home without using the Help to Buy equity loan scheme pay on average £257,908 compared with £277,968 paid by those who use the scheme.

This is on top of the average 16% new-build premium compared with secondhand properties.

Reallymoving.com is warning that the Help to Buy scheme could become “the next PPI scandal” as home owners may face difficulty when selling their property on, especially at a time when prices are falling in London and the south-east.

Those hoping to sell may also find that as they are required to repay the equity loan portion in full, making them unable to also raise a deposit on their next property and leaving them trapped, warned Rob Houghton, chief executive of reallymoving.com.

He said: “The Help to Buy scheme has provided a leg up on to the housing ladder for many first-time buyers but this data suggests that first-time buyers may not be getting such a good deal after all.

“When they come to sell this could increase the risk that their home isn’t worth what they paid for it.”

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3 Comments

  1. Hillofwad71

    A two tier market has set up in new apartment blocks in London where buyers are using  the enhanced deposit scheme which isn’t available on those;already  sold in the same block . So those having bought  in the block which include investors and speculators looking to  sell on are selling into a restricted market .So as soon as the Help 2 buyer  has bought off the developer that too becomes  second hand and  commands a lower  value.

    The discrepancy  can be quite significant  especially as the developer is  offloading  into a softening market more often that not  wiping out the buyers 5% cash deposit at a stroke and  immediately  plunging into negative equity.

    Developers slashing prices to below the £600k threshold to attract these buyers now domestic and  foreign investors have downed tools

    A big price to pay to get on the ladder

    A bit like the brand new car depreciating as soon as it leaves the showroom

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  2. Robert May

    Is the claim that if say a pair of semi detached new builds are being sold one will be 8% more than the one next door if  bought through help to buy, no increase in size, spec or plot just a higher price? If a purchaser is  able to spend more  because of help to buy it is natural they will spend as much as they can. If buying the D1 rather than the D2 (the D1 is 5 sqm larger with the downstairs cloakroom) is possible because of HTB  buyers will push themselves.
    If HTB is enabling the purchase of the slightly  bigger, slightly higher spec, slightly better plots that’s freeing up the slightly cheaper units for people who don’t have HTB, isn’t that the point?
    I think before going public with such a claim I would be wanting to know for sure something amiss is going on or whether people are simply spending more because they can.  
    Prices  in some outcodes have  been above trend for  3 or more years, people have been spending too much on on the homes in those areas.  HTB might be contributing to that by enabling people to  pay more in areas of high demand but  when all is said and done it is the buyers offer that sets the price. If the fear of being in negative equity is too much to cope with don’t  buy. Reduce demand and take the pressure off those less concerned about the well known ebbs and flows of the property market.

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  3. AgentQ73

    Government schemes distorting the market and having unintended consequences, who would have thought?

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