HOUSEBUILDERS’ share prices have skyrocketed today after Andy Burnham pledged a Your First Home scheme to help first-time buyers in England get onto the property ladder – as experts speaking to Newspage say they are the “real winners”.
Following the announcement over the weekend, UK housebuilder shares have soared, with Vistry, Persimmon, Taylor Wimpey and Bellway all climbing in the double digits in morning trading. Meanwhile, shares in Barratt Redrow have surged 14%.
The Prime Minister unveiled plans over the weekend for a new Help to Buy-style scheme designed to help first-time buyers get onto the property ladder.
Under the “Your First Home” scheme, eligible buyers will be able to access a 20% government equity loan towards the purchase of a new-build home, with an initial interest-free period and a minimum deposit of just 2.5%.
Why housebuilder shares are rising
The scheme is aimed at buyers in England who have a regular income but have struggled to save enough for a large deposit, or who do not have financial support from their families.
Despite the proposal, there will be some restrictions. A household income cap will be introduced to exclude higher earners, while local property price caps will also apply.
The government hopes the scheme will make home ownership more accessible to first-time buyers. Financial experts told Newspage they believe the biggest beneficiaries of the new scheme will be developers – with stocks soaring following the announcement of the scheme.
Martin Rayner, Financial Adviser at Compton Financial Services, admits the scheme is “good news” for first-time buyers as it could help people get on the housing ladder years earlier.
Mortgages
“The market has already spotted one likely beneficiary from Your First Home – the housebuilders”, the expert said. “This scheme should bring more potential buyers into the new-build market. That means more demand, potentially more sales and greater confidence for developers. First-time buyers can benefit too. For someone earning enough to support the mortgage but struggling to save a large deposit while paying rent, this could genuinely get them onto the housing ladder years earlier.
“The concern is what happens to prices. If you increase buyers’ purchasing power but do not increase the supply of homes quickly enough, some of that benefit risks feeding into higher new-build prices rather than better affordability.
“So this could be good news for first-time buyers, but the early reaction in housebuilder shares is a useful reminder: when government supports the demand side of housing, buyers are not necessarily the only ones who benefit.”
Some experts believe the stocks are rising because Your First Home will see more first-time buyers enter the market.
Jamie Elvin, Director at London-based Strive Mortgages, said: “Housebuilder shares are rising because investors expect Your First Home to bring more first-time buyers into the new-build market. If buyers can purchase with a 2.5% deposit, developers could see more reservations and sell homes faster.
“For first-time buyers, a smaller deposit could make a real difference. But buyers will still need to pass a lender’s affordability checks, and an equity loan means sharing any rise in the property’s value. The detail announced at the Budget will determine how many people it actually helps.”
While the full timetable of the scheme has yet to be released, experts believe it could help first-time buyers who have struggled to save for a deposit.
Tony Sanchez, Founder at Bridging Loan Directory, said: “Housebuilder shares are rising because investors expect Your First Home to help turn interest in new-build homes into completed sales. For a developer, selling finished homes releases capital that can go into the next site, so the potential benefit extends beyond the individual sale.
“A 2.5% deposit could help first-time buyers who can afford monthly payments but have struggled to save upfront. They will still need to qualify for a mortgage, and the equity loan will have to be repaid. We need the Budget details on price and income caps, the loan terms and when the scheme will start before judging how many buyers and developments it could help.”
Although not everyone is in agreement. Harry Goodliffe, Director at Winchester-based HTG Mortgages, believes the “real winners” will be the housebuilders, not first-time buyers.
Housebuilder shares: who are the real winners?
He added: “Follow the share prices, and you’ll find the real winners here, and they aren’t first-time buyers. Persimmon, Berkeley and Vistry are rising this morning because Your First Home hands them a queue of buyers who can only spend their Government-backed money on a new build, and builders price accordingly.
“We watched Help to Buy do exactly that, with new-build premiums that took years to undo when owners tried to sell. Expect builders to cash in and buyers to find out the hard way.”
However, one financial expert believes the scheme will help first-time buyers and the housing market – which can only be good news for developers.
Matt Coulson, Founder at Rickmansworth-based Heron Financial, said: “The share-price move is just the market doing its job. A scheme that puts more first-time buyers into new-build homes is good for new-build volumes, so developers of course benefit, and that gets priced in quickly. I wouldn’t take that as proof it’s a builder scheme dressed up as a buyer one. It can help both at once.
“The 2.5% deposit with a 20% equity loan is the same mechanic that made the original Help to Buy work, because it eases the deposit and the monthly payment together, which is exactly what stops people buying today.
“So it genuinely can help first-time buyers who otherwise couldn’t get there. The fair concern, and the lesson from last time, is the new-build premium: buyers mustn’t end up paying over the odds for the privilege. Two things guard against that. Target it at those who really need it, and make sure buyers get genuinely independent advice and a free choice of who arranges their mortgage. Get that right and buyers, builders and the taxpayer can all come out ahead.”
