Can't afford it? Think again
A new scheme is helping people who would otherwise struggle to set up home. Graham Norwood discovers how
Wednesday, 16 August 2006
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A private developer is pioneering a new incentive scheme to encourage first-time and low-paid buyers to get on to the property ladder.
Acorn, a north London-based developer that builds homes across the capital and in northern England, has launched what it calls a "rent to buy" scheme which allows those who rent one of its properties for one to two years to use half of their rental payments as a deposit to buy the property in a conventional way.
The scheme targets prospective buyers who have no deposit at all and who still need to rent while they are saving to buy.
Tenants lease an Acorn property that they are interested in buying and - providing they can prove they can afford to buy at the end of the rental period - Acorn will save 50 per cent of their deposit each month which will form the down payment on purchasing.
Clearly, buying a home that you are already renting effectively removes the costs incurred in moving; there will be no need for removal vans, disconnecting and reconnecting utilities and telephone lines.
Acorn, which has worked with local authorities and housing associations on a series of affordable housing and regeneration projects, rents out its properties fully furnished, so purchasers can also keep the furniture they have been using too.
Prices for Acorn's developments start at £250,000 in London and £90,000 elsewhere in the UK. "There's no hidden catch. This is just a way of driving buyers into an Acorn property," a spokeswoman says.
Acorn insists its rent levels are average for the local markets in which they operate - so in effect, they are countering claims that their rents may be inflated to take into account the 50 per cent which may ultimately be used towards a deposit.
Likewise, they insist that prospective buyers are permitted to have a conventional valuation made on their property to ensure that the purchase price also reflects the local market, and is not artificially raised to compensate the company for accepting some of the rental income as a deposit.
Of course, this is not the only developer pushing out incentives to encourage low-paid and first-time buyers.
Newland Homes is offering a £10,000 discount on selected properties at a new block of flats overlooking the River Taw in Barnstaple, north Devon. Barratt Homes is offering a package of options including the payment of stamp duty and legal fees, and sometimes even the waiving of a 5 per cent deposit, in order to encourage first-time buyers. Bryant Homes, which is part of Taylor Woodrow, is offering cashback and the payment of a deposit, stamp duty and legal fees on selected schemes.
These incentives from the private sector come as research by the Halifax bank reveals that average property prices in two-thirds of the UK are unaffordable to those in five "key worker" groups - nurses, police, teachers, ambulance workers and firefighters.
Unsurprisingly, property is least affordable in Greater London, where the average home costs 11.1 times the annual pay of ambulance staff and 9.5 times a nurse's earnings. Firefighters living in the South-east would have to borrow 8.5 times their salary to get on to the property ladder.
Property is most affordable in Scotland, where the average home costs 3.4 times a police officer's salary and 3.7 times a teacher's. But even north of the border, 10 per cent of towns are statistically unaffordable for all key workers.
The average property is beyond the reach of all five key worker groups in all towns in the south-west, and around 50 per cent of areas in the East Midlands, East Anglia, Yorkshire and Humber, West Midlands and the North-west are currently classified as unaffordable.
Martin Ellis, chief economist at the Halifax bank, says: "Key workers have been hit hard by the strength of the property market over the past five years. It's important that the Government develops schemes to help key workers on to the property ladder and to ensure that these schemes are not confined to southern England. The presence of sufficient key workers is critical to the smooth functioning of life in our cities and towns."
There is of course one other reason why housing industry insiders are concerned at the absence of low-paid and first-time buyers - they form a crucial part of the property-buying chain, and without them current owners cannot sell their properties and move onwards and upwards.
