New-build affordability remains barrier for first-time buyers: Foxtons

Research from Foxtons has found that just 31% of first-time buyers considered purchasing a new-build home, with the price premium attached to these properties emerging as the biggest barrier. However, 62% were unaware of the financial and practical incentives developers can offer to help reduce the upfront cost of buying, while 53% said greater awareness of these incentives would have made them more likely to consider a new-build.

Foxtons surveyed first-time buyers who had purchased a property within the last two years, examining their attitudes towards new-build homes, the factors that influenced their eventual purchase and their awareness of the incentives available.

The findings come following the announcement of Andy Burnham's proposed Your First Home scheme, which aims to improve access to new-build properties by reducing the deposit required to 2.5%, alongside a government-backed equity loan.

First-time buyers overlook new-build properties

The research found that just 31% of first-time buyers considered a new-build when purchasing their first home. More than two-thirds (69%) did not consider one, while just 6% ultimately purchased a new-build property.

Affordability was the most frequently cited barrier among those who chose an existing property. More than a quarter (26%) said new-build homes were too expensive or carried too much of a price premium, making this the leading reason for not buying one.

Availability was another factor, with 13% saying there were not enough suitable new-build homes in their preferred area. A further 12% believed they could secure more space for their money by purchasing an existing property.

The findings point to two areas where the proposed Your First Home scheme could potentially make a difference. Reducing the initial deposit requirement could help address the upfront affordability barrier facing first-time buyers, while increased demand for new-build homes could give developers greater confidence to bring additional properties to market.

New-build benefits appeal despite upfront costs

Although upfront affordability deterred many first-time buyers from considering a new-build, the research suggests that the prospect of lower ongoing costs remains attractive.

Some 39% of respondents cited the absence of immediate renovation or repair costs as a key benefit of new-build homes, while 22% pointed to better energy efficiency. A further 15% said having a property in which everything was brand new and unused was the most appealing aspect.

The findings suggest that first-time buyers recognise some of the longer-term financial benefits associated with new-build properties, but the initial cost remains a significant obstacle when deciding which type of home to purchase.

62% unaware of developer incentives

The research also identified a significant awareness gap around the support developers already offer to help buyers manage the upfront costs of purchasing a new-build home.

Almost two-thirds (62%) said they had been unaware of the financial or practical incentives available from developers when they purchased their first home. Only 38% knew these incentives were available.

When asked which financial incentives would have made a new-build more appealing, a contribution towards their deposit or deposit matching ranked highest, cited by 19% of respondents. A purchase price discount followed at 17%, while 14% said a contribution towards stamp duty would have made a difference.

Other incentives included contributions towards legal fees (12%), cashback on completion (10%), access to a reduced mortgage rate through a developer-backed scheme (9%) and contributions towards mortgage payments (8%).

More than half (53%) said that being offered financial incentives and property extras would have made them more likely to consider purchasing a new-build home.

With the proposed Your First Home scheme bringing the affordability of new-build properties into focus, Foxtons believes greater awareness of both government support and existing developer incentives could encourage more first-time buyers to consider the new-build market as a route to homeownership.

Amit Masrani, new homes sales director at Foxtons, said: “Affordability is quite clearly the biggest obstacle preventing more first-time buyers from considering a new-build home, and so the proposed Your First Home scheme has the potential to make a meaningful difference by reducing one of the biggest upfront barriers they face.

“But what's particularly interesting from our research is that there is a considerable awareness gap around the support that already exists when purchasing a new home.

“First-time buyers clearly recognise many of the longer-term benefits of buying new, from improved energy efficiency to avoiding the immediate repair and renovation costs that can come with an older property. However, almost two-thirds of recent first-time buyers didn't know that developers can offer incentives to help reduce upfront costs as well.

“More than half told us that these incentives could have made them more likely to consider a new-build, so the challenge isn’t just helping them overcome that initial affordability hurdle; it’s also educating them on the benefits of buying a new home and, of course, ensuring an adequate level of supply in the right areas.”