Burnham could boost new-build demand but 62% of first-time buyers unaware of incentives already available

The latest research* from Foxtons has revealed that just 31% of first-time buyers considered purchasing a new-build home, with the premium attached to new-build properties proving the biggest barrier. However, almost two-thirds (62%) were unaware of the financial and practical incentives developers can already offer to help overcome the upfront cost of buying, with 53% stating they would have been more likely to consider a new-build purchase if they had been more aware.

Foxtons surveyed first-time buyers who had purchased their home within the last two years, looking at their attitudes towards new-build properties, the factors that influenced their eventual purchase and their awareness of the incentives available when buying a new home.

The research comes following the announcement of Andy Burnham's proposed Your First Home scheme, designed to improve first-time buyer access to new-build homes by reducing the deposit required to 2.5% alongside a government-backed equity loan.

First-time buyers failing to consider new-builds

The research found that just 31% of first-time buyers considered a new-build when purchasing their first home, whilst more than two-thirds (69%) didn't consider a new-build at all and, ultimately, just 6% said they went on to purchase a new-build property.

Affordability emerged as the biggest obstacle amongst those who opted for an existing property. More than a quarter (26%) said new-build properties were too expensive or carried too much of a premium, making this the most commonly cited reason for not buying one.

Supply was also prominent barriers, with 13% stating that there were not enough suitable new-build homes available in their preferred area, whilst 12% believed they could get more space for their money by purchasing an existing property.

The findings highlight two key challenges that the proposed Your First Home scheme could potentially help address. A lower initial deposit could reduce the upfront affordability barrier for first-time buyers, while stronger demand for new-build homes could provide greater confidence for developers to bring more homes to market.

New-build benefits appeal, but upfront cost remains the hurdle

Despite upfront affordability deterring many first-time buyers from considering a new-build, Foxtons' research shows that the longer-term financial benefits do appeal.

39% of those surveyed cited having no immediate renovation or repair costs as a key benefit of new-build homes, while 22% cited better energy efficiency. A further 15% said the fact that everything in the property would be brand new and unused was the most appealing aspect.

This suggests that first-time buyers value the potential for lower ongoing costs that come with a new-build property, but it's the initial financial hurdle that remains a significant barrier to new-build consideration.

62% unaware of developer incentives

However, the research also suggests that many first-time buyers are unaware of the support already available to help overcome this hurdle, support which could have helped sway them towards a new-build purchase.

Almost two-thirds (62%) said that, when purchasing their first home, they were unaware that developers could offer financial or practical incentives to buyers of new-build properties. Just 38% knew such 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 at 19%, followed by a purchase price discount at 17% and a stamp duty contribution at 14%.

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%).

Crucially, more than half (53%) of first-time buyers 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 now placing the affordability of new-build homes firmly in the spotlight, Foxtons believes greater awareness of both government support and the incentives already available from developers could help considerably more first-time buyers view the new-build market as a viable route to homeownership.

New Homes Sales Director at Foxtons, Amit Masrani, commented:

"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."