The hidden cost of buying a new-build
The Government wants to help first-time buyers onto the property ladder. That's apparently why it's launched schemes like FirstBuy, where Government and home builders provide an equity loan of as much as 20% of the value.
New buyers stump up a 5% deposit but can then qualify for a 75% mortgage, which will have a better rate. There's also the recent NewBuy scheme.
I think this is a way of supporting house builders, not new buyers and certainly not the property market more generally. New build homes cost a lot more than simply the mortgage, and I should know – I'm trying to live in one.
Here's why I don't believe the Government should be urging new buyers into new builds.
My Wendy house
My husband and I bought our first home just before property prices plummeted.
But if the house was a bit more live-in-able, that wouldn't be a problem because we wouldn't need to move. It's a three-bedroomed home on an acceptable estate near the town centre; it should meet all our needs for some time.
Unfortunately, it's tiny. Absolutely miniscule, a play house. The rooms aren't really big enough for proper-sized tables, chairs and beds – a fact that was cunningly concealed when we visited the show home through the use of three-quarter-scale furniture.
Try to add wardrobes into that mix and you're stuck clambering over chairs to get out of the room. When I was pregnant, I couldn't reach the far side of the bedroom without climbing over the bed. It's a good thing heavily pregnant women are so lithe and graceful...
And this is not a problem with our specific builder or area, it's a national disgrace. A survey by the Royal Institute of British Architects found that the average new home in England is only 92% of the recommended minimum size. The recommended minimum. Most of us would probably prefer a bit more elbow room than the absolute minimum.
We're struggling to fit in this house and I know that the 10,000 new buyers the Government hopes will take up the FirstBuy scheme will end up in the same boat. Not only that, they will have lost money compared to buying an existing home.
The new home premium
When you buy a brand-new home, you'll usually pay a premium for the privilege of living somewhere that no-one else has. It's very pleasant to move into a property where everything is brand new, but it can be expensive.
It's hard to say exactly how much a home is devalued when it's no longer new and perhaps some don't lose value. The Royal Institution of Chartered Surveyors, says: "Approaches to the assessment of any new-build premium vary, and there is certainly no defined percentage of the selling price that can be ascribed with any confidence."
But for some properties it's as high as 10% of the home's value, instantly trapping some new owners in negative equity. If new buyers were purchasing existing homes, they wouldn't be running that risk at all.
The lack of cupboard space
From lofty financial concerns to simple pragmatics. New build starter homes like ours often have very limited cupboard space as the kitchens aren't exactly large.
That means that new buyers will struggle to fit in all their pots, pans, tins, dried food, cartons and so on – a problem that gets far worse if a baby arrives with its mountains of equipment.
Because of this, these homeowners will have to buy smaller packets of everything, from loo roll to dried pasta. That makes everything more expensive.
Throwing away things you could reuse
Another way that the lack of storage space hurts is that homeowners can't hang onto stuff. We've found ourselves selling or Freecycling kit that we know we might one day use again, from a hamster cage to a bicycle.
But because there isn't enough space to actually live in, let alone keep anything that isn't regularly used, we've had to get rid. It's necessary but it's a complete waste of cash.
Limited space to socialise
Did I mention that most newly-built starter homes are too small? The other issue with the lack of space is the lack of space to socialise.
New buyers snapping up a tiny house through the FirstBuy scheme may soon find that they can't fit more than four friends in the sole reception room of the property (without resorting to some sort of double-stacking situation that even IKEA hasn't yet managed).
That means that when they want to gather with friends, they'll have to do so somewhere else, most likely in a pub, club or restaurant, where it will cost much more.
Although this might sound like a relatively minor and even whingy complaint when some people don't even have roofs, think about how often you see your friends. If it always had to be outside of the home, it would cost you a lot more. New buyers shouldn't have to just suck that up.
No room to grow
New homes don't just have small rooms, they often have the smallest garden the builder can get away with (and don't get me started on the 'soil').
That means that buyers will struggle to grow their living space later on, for example, by adding a conservatory. If homeowners couldn't sell their property because the market was still sluggish, they'd have far fewer options for expanding it.
When the builder is selling a new property, it will probably make a big deal about how the buyer can choose the décor and add as many extras as they like. But those extras cost extra – and by extras I mean things like carpets, proper garden fences and even grass.
Most new buyers will be flat broke when they buy their first homes and won't be in a position to pay for these things. That means they will have to buy them later on, which wouldn't necessarily be the case with an existing home.
Real help for first-time buyers
It seems that what the Government wants to do is support new buyers and the home-building industry. And that's laudable; there is a housing shortage in the UK and so it makes sense to encourage the creation of new homes.
But that's not exactly going to get the property market moving further along, as new homes will soak up all the prospective buyers. Would-be second steppers like us will be unlikely to benefit for a good many years, so it's hardly going to get the property market moving again.
However, would-be buyers don't have many options in this tough market and so will end up in newly-constructed homes through FirstBuy, whether they want a new build or not.
Clearly the Government is in a bind; it wants to support new buyers but needs the home builder industry to assist in the equity loan. However, it must be possible to support new buyers in other ways so that they have greater choice. Leaving the Stamp Duty exemption in place would have been a start.
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