The number of first time buyers (FTBs) getting onto the property ladder has dwindled in recent years, as they have effectively been priced out of contention. Now, a new initiative to build 10,000 new affordable homes on surplus public sector land for first time buyers has been drawn up in an attempt to jumpstart the market.
Under the government's new scheme, surplus land owned by the public sector would be set aside for new homes for first time buyers. The land remains in the public sector in a trust but is leased for new housing. First time buyers wishing to purchase a property would pay building costs, but would not pay for the land. The Government expects the houses to cost as little as GBP60,000.
Average house prices in London have spiraled recently and, according to the Halifax house-price index, average London house prices have more than doubled in the past five years, from 114,000 in 1999 to 248,000 today.
The motivation behind this scheme may partly be in response to criticism the government received for its Starter Homes Initiative - aimed at helping 10,000 key workers (such as teachers, nurses and police officers) purchase homes near their place of work - which was seen as too small scale and exclusionary.
Although ten thousand houses will go some way to helping first time buyers into the market, it may be too little too late. According to figures from the Council of Mortgage Lenders, only 367,000 FTBs took out a mortgage to buy a home in 2003 compared to 532,000 the year before and 593,000 in 1999. Barring a dramatic drop in house prices - something that does not look particularly likely - this trend looks set to continue for the foreseeable future.
While the Government has given an encouraging sign that it will attempt to tackle the problem facing first time buyers, it cannot solve the problem alone. Property developers must look at commercially viable solutions to build alternative forms of housing that are within the reach of FTBs such as micro-flats, which are hugely popular in Japan. Mortgage lenders too must be more proactive in developing products to help FTBs. Although some lenders offer innovative products, such as guarantor mortgages, shared equity ownership mortgages and 'rent-a-room' mortgages, they are still too few and far between.