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British Election 2015

Cameron pledges to double UK starter homes to boost supply

PUBLISHED : Wednesday, 04 March, 2015, 6:00am
UPDATED : Tuesday, 21 April, 2015, 6:29pm

British Prime Minister David Cameron pledged to double the number of homes built for first-time buyers by the end of the next parliamentary term in a bid to tackle the country's housing shortage.

In a speech on Monday setting out the final part of his Conservative party's six-point campaign platform for the May 7 election, Cameron said 200,000 properties would be built by 2020 under his starter-homes plan.

Prices of the homes, only available to first-time buyers under the age of 40, will be capped at £450,000 (HK$5.37 million) in London and £250,000 outside the capital.

Reduced planning constraints will make it easier for developers to cut building costs, allowing the homes to be sold at a 20 per cent discount.

"This policy will work not least because the property developers, the builders, the building industry are all coming out and saying they'll deliver it," Cameron said in answer to questions.

"Here in Britain we haven't delivered enough homes for young people to buy."

Cameron's Tory-led coalition has already sought to address a housing shortage with policies such as Help-to-Buy loans and mortgage guarantees and an existing pledge to build 100,000 starter homes.

While mortgage rates are at record lows, a lack of supply and high demand have pushed up house prices.

This latest pledge is part of Cameron's attempt to rebuff opposition Labour Party criticism that his policies only benefit the wealthiest.

The average national house price is now £279,004, up 6.6 per cent from a year earlier, a report by Rightmove showed last month. The average for greater London has risen 9.7 per cent to £582,438.

Cameron restated the Conservatives' commitment to extend the first-part of the Help-to-Buy programme, targeted at buyers of newly built homes, to 2020.

The plan offers homebuyers an interest-free government loan of 20 per cent of a property's value if the buyer makes a 5 per cent down payment.

Cameron said 77,000 buyers had used the programme.

"Our commitment is to extend the equity-loan part of Help-to-Buy for the whole of the next parliament, helping an additional 120,000 families to buy a home of their own," he said.

The starter homes will not be available to buy-to-let investors, and developers such as Taylor Wimpey and Barratt Developments have already signed up to the plan.

A special levy to claw back the 20 per cent cost reduction of the home would be applied to buyers who sought to sell the property within the first five years of purchase, Cameron said.