It may sound like good news for 10,000 first-time buyers who would otherwise struggle to get on to the housing ladder but the real winners from FirstBuy are still housebuilders.
Allocations for the scheme announced in the Budget were revealed this morning, with housing minister Grant Shapps hailing it as ‘a valuable alternative to the Bank of Mum and Dad’.
Like HomeBuy Direct, the Labour scheme that Shapps dismissed as ‘a very expensive flop’, Firstbuy offers equity loans jointly funded by the government and the housebuilder. The key differences are that the loans available are smaller (20% of the value of the property rather than 30%) and that the first-time buyer must put up a deposit of at least 5%.
Shapps describes it as worth £500m, a figure that is presumably a combination of the £250m announced in the Budget in March and the housebuilder contribution.
However, the detailed allocatiions revealed by the Homes and Communities Agency (HCA) today reveal that it will deliver 10,452 homes for just short of £180m. Take off £40m allocated separately for Scotland and Wales, and that means a saving of £30m on original plans.
The reason for that could well be the regional breakdown of the bids. The two biggest beneficiaries are the Midlands (2,418 homes) and the North East, Yorkshire and Humberside (1,991 homes).
In contrast, expensive London gets the allocation for the lowest number of Firstbuy homes (939). The HCA said this was in line with the bids received.
Housebuilders signed up include giants like Persimmon, Barratt, and Taylor Wimpey and many smaller firms too.
Lenders backing the scheme are named as including the Halifax, Nationwide and Barclays plus the Melton Mowbray Building Society, a list that perhaps begs a question about the involvement of Santander, RBS and HSBC.
Housing associations like Genesis, Notting Hill and Metropolitan will also benefit but according to my calculations social landlords will be allocated a little under £5m, or just 3% of the total.
Housebuilders, with the remaining 97% of the funding, look like the big winners from FirstBuy. They get a powerful new marketing scheme half-funded by the government that will help support the prices of starter homes.
The benefits for the government are less clear. Where HomeBuy Direct played a key role in rescuing the housebuilding industry from the credit crunch, housebuilders have already got rid of most of their unsold stock. It’s true that FirstBuy will, as Grant Shapps argues, provide ‘a much-needed boost to our housebuilding industry, supporting thousands of jobs across the country’ but so would investment in more affordable homes.
The lucky 10,500 first-time buyers look like winners too until you consider what will happen if house prices fall. When the scheme was first announced, the Financial Times called it ‘a small step - in the wrong direction’ while the Social Market Foundation called it ill-advised and dangerous and a ‘leg up to the noose of negative equity’.
For the market as a whole, it probably won’t make that much difference: even if all those 10,500 buyers are people who would not have entered the market anyway that would only boost the number of first-time buyers by around 5%.