The Chancellor’s update on the Starter Homes initiative will undoubtedly be music to the ears of those currently within touching distance of home ownership.
Commenting on the Chancellor’s announcement to invest £2.3bn to fund 60,000 Starter Homes, Jan Crosby, head of housing at KPMG, said:
“The Chancellor’s update on the Starter Homes initiative will undoubtedly be music to the ears of those currently within touching distance of home ownership. The 20 per cent discount on market sale value will help them gain a step up, but the real win comes after five years when they can sell their home at market value and cash in tax-free.
“If we consider that the Government’s sums create a discount of £38,000 on each home sold, the average price of a home works out to just under £200,000. Selling after five years would gift the owner £38,000 free, on top of any inflation in property value. At the top end of the range, with a home worth £450,000, that increases to £90,000 plus inflation. For those who can scrape together their deposit and buy a home, taking advantage of the Starter Homes scheme is a no brainer.
“However, for everyone else this initiative is purely inflationary. It also will not create the amount supply the Government says it will, because it will in part cannibalise housing that would have otherwise been built, particularly social housing and rental stock. Such a populist strategy may work for the Government itself, but could cause more issues within the market during the next parliament.
“And the aside here must be a question over whether 60,000 homes will actually be provided through the scheme – at an average price of £200,000 a home, we must see a truly representative split across the UK to get to this figure. If Starter Homes are loaded into the South where prices are higher, we’ll see far fewer built.”
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