Can political parties tempt UK’s first-time buyers? - David Alexander

13th Jun 2024
David J Alexander
Can political parties tempt UK’s first-time buyers? - David Alexander - D. J. Alexander

Young voters are needed by Labour and the Conservatives, but are they offering enough to get that ‘X’?

After an election campaign which has barely mentioned housing, it has finally come to the fore this week as party manifestos are published. Both the Conservatives and Labour have focused on initiatives to help first time buyers (FTBs) for the obvious reason that these are largely younger voters who may be swayed by some judicious and targeted incentives.

The Conservatives are pledging to permanently end stamp duty for FTBs purchasing properties costing up to £425,000. Of course, this does not apply in Scotland where FTBs have to pay land and building transaction tax (LBTT) on all purchases valued at more than £175,000. As I have mentioned previously, the rates for property tax should be level across the UK to ensure Scottish buyers are not penalised.

The Conservatives are also proposing a £1 billion scheme to help FTBs with government-backed mortgages to allow them to buy a home with just a five per cent deposit. The plan, modelled on the Help to Buy scheme that closed last year, could be used for all home purchases of less than £400,000.

They are also promising to scrap capital gains tax for landlords who sell their property to tenants. It is hoped the scheme will convince landlords to free up more housing stock and also benefit long-term renters, but as it is set to cost £20 million a year this implies there will be few takers.

The Labour Party offer is in a similar vein and proposes a continuation of the current Conservative Government’s scheme to ensure that low deposit mortgages are available for FTBs which it believes will help 80,000 people over the next five years. Labour also has a proposal to build 300,000 new homes a year in England.

Scotland has a couple of schemes aimed at FTBs which involve shared equity, with the purchaser providing between 60-90 per cent of the sale price, with the Scottish Government providing the balance and this percentage refunded when the property is sold.

The decline in the number of FTBs in the UK is alarming, having fallen 21 per cent in 2023 to 293,339 from 369,870 in 2022. During the last decade, there has been an average of 335,978 first-time home buyers each year. There were 6,810 new mortgages advanced to FTBs in Scotland in Q4 2023, an annual decrease of 7.7 per cent. Comparing 2023 as a whole to 2022, new mortgage advances to first-time Scottish buyers decreased by 11.3 per cent. The Conservative policy will directly help FTBs by offering a low deposit, lower cost entry into house purchase. Labour’s offer is similar but not quite as bold.

This all seems laudable but is largely tinkering around the edges. With both major parties trying to woo voters with eye-catching proposals to encourage homebuying the bigger picture remains unresolved both at Westminster and Holyrood.

The real way to ensure FTBs can buy a more affordable property is to build more homes to meet demand. To reduce rents, you need to build more homes. To ease waiting lists, you need to build more social housing. Labour’s plan is valid but requires a major review of planning if it is to succeed.

Only by increasing the number of houses in the market will we ever be able to ensure prices become more affordable for homebuyers and renters in all parts of the UK.