Good news for first-time buyers

The Help to Buy scheme was introduced in Wales in January 2014, and allows homebuyers to purchase new build homes with a minimum 5% deposit. The Welsh Government provides an additional equity loan of between 5% and 20%, reducing the traditional mortgage borrowers require. This makes it easier to pass affordability tests and gives buyers greater spending power. This has been of most use to first-time buyers (FTBs), who have made up more than 75% of buyers under the scheme.

At its height in 2017 and 2018, HtB supported 25% of all new home sales in Wales, with some housebuilders reporting they had sold 25-35% or even up to 50% of their homes through HtB. A lower value threshold in 2021 and 2022 saw use of the scheme fall significantly, but the number of purchases began to rise marginally again from 2023, when the threshold returned to £300,000. This increase has coincided with an easing in mortgage rates and growing sales demand in Wales, which could drive a further increase in take-up under the extended scheme.

Who is using Help to Buy – and where?

Help to Buy sales, like the overall pattern of new build completions in Wales, have been focused in the South East. Newport has seen the most sales over the life of the scheme, with almost 2,000 (14% of the total), while Cardiff, Bridgend and the Vale of Glamorgan have seen a further 4,000 between them.

The scheme has enabled a variety of different buyers to purchase a range of homes. Couples with no children were the most common buyer group, buying 46% of HtB homes, while 27% went to single people and 25% to families. 54% of all homes sold were three beds, with a further 43% being either two or four beds. 

Most of the homes bought through the scheme have been more affordable than the average new build home. The average HtB home in Wales has sold for £195,000 and 81% of HtB sales have been for less than £250,000, according to Stats Wales, compared to an average sales value of £240,000 across all new homes while the scheme has been in place.

With no increase in the value cap from the 2014 level, homes sold under HtB are increasingly concentrated at the lower end of the new build sales market. The average new home in Wales sold for £194,000 in Q4 2014 according to Land Registry, well below the HtB threshold of £300,000. This meant most new homes were eligible for sale through HtB, and the average HtB sale price of £179,000 was just -8% lower than the overall market average. Fast forward to Q4 2023, and the average new build home price was £320,000, above the value threshold. The average HtB sale price was much lower in comparison at £259,000.

Is a regional value cap needed?

The cap has restricted the type of properties and the locations in which the extended scheme can offer buyers a route into home ownership, as the value threshold battles against the requirements of scheme viability. 

Help to Buy is currently least effective as a form of demand support in less affordable areas, where values are most likely to exceed the threshold. But it is in these areas where FTBs are most likely to need support to get onto the housing ladder, because housing affordability is more stretched. This is evident in Cardiff, where a sharp rise in new homes delivery from 2021 has coincided with a decrease in HtB sales, as the homes delivered are generally above the value threshold.

Calls for regional value caps under the extended scheme were disregarded by the Welsh Government, in favour of a simpler nationwide scheme. This scheme extension will ensure that housebuilders, particularly in lower value parts of Wales, can benefit from a larger pool of potential buyers. But with more new build homes being built above the value cap, the impact the scheme can have in helping FTBs into home ownership and supporting housing delivery may be more limited than under previous iterations. Any further extensions to Help to Buy may have to consider the suitability of a £300,000 value cap nationally, if the scheme is to continue aiding housing delivery across the whole of Wales.

Further information

Contact Dan HIll