March 18th saw George Osborne deliver his sixth Budget as the UK chancellor. The announcement – the last of the current Parliament – has accelerated the political competition ahead of the May general election.
A priority topic in this year’s announcement was the new Help to Buy Isa, a proposal that is sure to have a significant impact on the UK’s first-time buyers
If instated, the scheme will enable anyone over the age of 16 hoping to buy their first property to set up an Isa dedicated to helping them save for a home. The proposed policy could be in effect from Autumn and aims to help people aspiring to step onto the property ladder by offering up to £3,000 towards a deposit.
The premise of the scheme is to enable first-time buyers to establish a tax free savings account that can only be used towards a property. The Help to Buy Isa can boost savings by up to 25%, as for every £200 saved by the buyer the government will supplement this with £50. Only available to aspiring home owners and not for buy-to-let purposes, the Isa is restricted whereby the maximum a buyer can save is £12,000. However, with the help of the government, a savings pot can be boosted up to £15,000. As an Isa can be established per-person and not per-property, a couple saving for a home together could be granted up to £6,000 by the government.
The minimum government contribution for the Isa is £400, however to receive the maximum contribution, on average it would take a saver five years for their Isa to mature if they invested £200 a month. If a saver is able to put forward a lump sum of £1,000 upon establishing the Isa, this time scale can be reduced to four and a half years. In addition, the value of a home that the Isa can be put towards is capped at £450,000 in London and £250,000 elsewhere in the UK.
Improving first-time penetration to the property market is a pertinent business issue at Strawberry Star therefore the proposed Help to Buy Isa could introduce a welcomed change for the clients that we stand to serve. A significant objective behind our operations is to provide a more affordable and potentially more profitable means of stepping onto the property ladder, by offering numerous off-plan properties at a more attainable price tag. In terms of our service proposition, promoting accessibility onto the UK property market does not solely surround affordability. We place a significant focus on the calibre of property we aim to deliver for first-time property buyers, prioritising the life-style requirements of London’s workforce to ensure the step up from a rental to owned market does not mean downgrading one’s standard of living.
The benefits of buying a home in the blueprint stage are numerous for aspiring home owners. One particular long-term advantage, especially if the property is situated in a regeneration area, is the room for capital growth before the property is even completed and the buyer has moved into their new home. Further to this, an extra two to three years prior to moving into a finished property grants the buyer with the luxury of more time to save for solicitors’ fees and additional costs that moving into a first home can require.
As with any Budget policy, the Help to Buy Isa has already been subject to debate, however the sentiments behind the initiative mirror our rationale at Strawberry Star. Reinforcing the importance of assisting new buyers with a government-backed initiative is a crucial first-step in supporting UK home-owners on the property ladder.
Our latest research report Estate Agent Evaluations revealed the sentiments of young people in the UK, many of whom will be trying to buy a home. To view their stance on the UK property market, click here.