Your First Home Could Boost Sales. Will Developers Keep More Profit?

The government’s Your First Home scheme could bring more buyers into new-build sales offices. For developers, however, the Budget presents a calculation: whether faster completions and lower finance costs will outweigh the contribution payable on supported sales.

The potential difference is material. A developer selling 30 eligible homes at £300,000 each within the published 1% fee band would contribute £90,000. Stronger demand could justify that cost, but a larger reservation book alone would not establish the benefit.

This follows Willow’s report on falling new-home registrations and pressure on development margins. The new buyer support addresses the sales side of that problem. Its value to a particular site will depend on eligible stock, achievable prices and the timing of cash receipts.

Buyer support creates an opportunity for housebuilders

The 28 October Budget confirms £4.7 billion for Your First Home. Eligible first-time buyers in England will be able to combine a minimum 2.5% deposit with a 20% equity loan and a repayment mortgage to buy a qualifying new-build home.

For a developer, the attraction is a wider pool of purchasers who might otherwise struggle to assemble the deposit or mortgage needed. Turning that potential into completed sales could shorten the period for which capital remains tied up in finished homes.

Knight Frank’s Budget analysis identifies the possibility of stronger sales rates improving viability and encouraging site starts. It also warns that price restrictions, developer contributions and limited annual funding could constrain the effect.

The scheme was first announced in September. The fresh development is the Budget’s funding and implementation detail, giving housebuilders more substance for their appraisals.

The developer contribution is now more than a proposal

The government’s detailed guidance already publishes fees based on final sale prices and the number of homes a developer sells through the scheme annually.

The lower band supports smaller volumes of participation. It should not be read as a fresh allowance for every site. A developer with several projects needs to establish the annual position and check how the participation agreement treats connected entities and counting periods.

That means an initial appraisal can use the published rates where the relevant band is clear. Outstanding contractual details, payment timing and any additional administration costs still need checking before a binding commitment.

What the contribution means for a 30-home development

Consider a hypothetical site with 30 homes selling for £300,000 each. Assume every home and buyer qualifies, the developer is accepted, funding is available and all sales fall within its first 100 scheme transactions that year.

Gross sales would total £9 million. The 1% participation fee would be £3,000 per home, or £90,000 across the site. After that fee alone, receipts would be £8.91 million, before construction, land, finance, selling and other project costs.

If the same homes would otherwise sell for the same prices on the same dates, participation reduces the developer’s return by the contribution and any extra costs. The case improves only when it changes something commercially valuable.

That might be an earlier completion, a sale that would otherwise be lost, or less need for a price reduction. Each benefit needs evidence from the site’s market and sales pipeline.

Distinguish extra demand from a buyer simply changing payment route. An existing purchaser using the scheme may still produce a successful sale, but it is not necessarily an additional transaction created by government support.

How much earlier would the sales need to complete?

Timing can make a substantial difference to development finance. For illustration, suppose participation allows a £3 million debt balance to be repaid three months earlier. At an assumed 10% annual simple interest rate, the interest avoided would be approximately £75,000.

That falls £15,000 short of the £90,000 contribution in the 30-home example. On these assumptions, interest savings alone would need approximately 3.6 months of earlier repayment to match the fee.

This is a sensitivity calculation, not a lending quotation or sales forecast. Actual debt reduces through individual completions, and a facility may include retained interest, compounding, minimum interest or other charges. The loan agreement determines the saving.

Earlier sales could also reduce security, insurance and other holding expenditure, while releasing the developer’s equity for another project. Those benefits belong in the comparison where they can be supported.

The useful model therefore tracks receipts and loan balances month by month. Applying a shorter sales period to the entire original facility risks overstating how much finance cost disappears.

Price caps could matter more than the participation fee

The Budget sets a local price-cap approach, including £650,000 in inner London and £500,000 in outer London. Knight Frank expects the impact to be stronger in more affordable markets, where more new-build stock can fall within the limits.

For an individual site, map each unit against the applicable cap. A development may contain both potentially eligible starter homes and larger properties that do not fit. Applying a single assumed sales uplift to the whole site could overstate the benefit.

Price adjustments also need scrutiny. Reducing the price of 30 homes by £5,000 each would remove £150,000 from gross receipts before considering participation fees. That is a separate commercial decision from paying to join the scheme.

A lower headline price may be worthwhile if it unlocks sufficiently faster or more certain sales. Compare it with the price and incentives realistically achievable without participation, rather than with an unsupported original target.

For land acquisitions, this distinction matters early. A more active sales market does not justify paying more for a site unless the residual appraisal still works after the scheme’s costs and restrictions.

Annual funding and the launch timetable limit immediate certainty

Published guidance allocates £700 million in 2027–28 and £1 billion in each of the following four years. This is a funded programme with annual limits, rather than an unlimited commitment to support every eligible purchase.

The Budget timetable provides for pre-registration by the end of December, applications from February 2027 and first loans from April 2027. It does not create a route for completing a supported purchase today.

A developer with finished stock needs to compare the cost of waiting with existing opportunities to sell. A possible future supported buyer may not be preferable to a conventional purchaser ready to complete sooner.

For schemes completing later, assess the sales programme against the expected allocation process. Until an applicable commitment is confirmed, future support should not be treated as guaranteed cash arriving on a particular date.

What changes in the development-finance appraisal?

Start with two versions of the same project: conventional sales and participation. Keep build costs and the construction programme consistent unless there is a specific reason for changing them. Then vary the supported sales, prices, fees and completion dates explicitly.

Compare total profit, peak debt and the developer’s required equity. A project could sell faster and incur less interest overall while still needing extra cash at a particular point, depending on when fees and other payments fall due.

For an existing facility, confirm how revised net proceeds interact with the lender’s agreed repayments on unit sales. Reservations are useful evidence of interest, but they should not be treated as completed transactions or unrestricted cash.

A downside case should allow for weaker take-up, slower completions or fewer supported sales than planned. This helps establish whether the project remains financeable if the scheme delivers less benefit than the sales team expects.

A stronger exit needs evidence as well as policy support

For SME housebuilders, Your First Home could improve the prospects of selling suitable stock and releasing capital. For landowners and developers considering new starts, it may strengthen the demand case for a project that was previously marginal.

Willow’s assessment is that the strongest financing discussion combines the unit schedule, current sales evidence, published fees and a dated cash-flow forecast. Surveyors, sales agents and accountants can contribute to that work before the borrowing requirement is finalised.

The government is helping buyers cross the affordability gap. Whether that also improves a developer’s return will be decided by the net proceeds, the speed of repayment and the amount of risk remaining in the project.