New houses on horizon. Will prices fall to earth?

Proposals to build an extra 120,000 homes a year, finds Sam Dunn, might not be enough on their own to solve the plight of first-time buyers

First-time buyers found little to cheer about in last week's Budget as the Chancellor ignored calls to exempt them from stamp duty, or at least to raise the starting band from £60,000. Instead, he froze stamp duty levels and left the Barker report to find a way of easing the difficulty of getting on to the property ladder.

First-time buyers found little to cheer about in last week's Budget as the Chancellor ignored calls to exempt them from stamp duty, or at least to raise the starting band from £60,000. Instead, he froze stamp duty levels and left the Barker report to find a way of easing the difficulty of getting on to the property ladder.

The Barker report on housing supply, which was released on the same day as the Budget, recommends that an extra 120,000 homes be built every year in the UK. Kate Barker, a member of the Bank of England's Monetary Policy Committee, says the demand/supply imbalance in housing is pushing property prices out of the reach of many people. In 2001, for example, just 175,000 new homes were built in the UK - the lowest annual level since the end of the Second World War.

Not surprisingly, house- builders and estate agents are delighted at the proposals. Peter Bolton King, the chief executive of the National Association of Estate Agents, says that thousands of new homes would help to stabilise prices.

But not everyone is so impressed. David Bitner, the head of product operations for independent financial adviser The MarketPlace at Bradford & Bingley, says: "The Chancellor was obviously concerned enough about supply and demand to have commissioned the Barker review. He should therefore be extremely concerned about the falling level of first-time buyers, yet nothing in the Budget addresses this.

"The Chancellor has really missed an opportunity by not updating the stamp duty bands. It was never designed to take money from first-time buyers yet it now affects a vast proportion of them and is seriously hampering their ability to get a foot on the housing ladder. The average first-time buyer now has to find over £900 to pay this tax, at a time when most are struggling to even fund a deposit."

Shelter, the charity for the homeless, also believes that not enough has been done. Its director, Adam Sampson, welcomes the report's call for "serious investment in social housebuilding" and its plans to build some 23,000 social housing properties at a cost of between £1.2bn and £1.6bn. But, he adds: "The housing crisis has come to pass because of the failure of successive governments to invest in housing, yet the Chancellor has ducked the opportunity presented by the Barker report to signal that he will commit extra cash to end the crisis."

A recent Shelter report, Building for the Future, estimates that 89,000 affordable homes must be built every year to address the housing problem. But plenty of barriers stand in the way, including planning complexities, the lack of fiscal incentives for developers and the lack of foresight from local authorities.

The loss of properties via the "right to buy" scheme - under which tenants can purchase their homes after two years for a discount, and sell them on in the private sector for a profit - is exacerbating the problem.

With the number of first-time buyers entering the market at a historical low - 29 per cent in 2003 compared with 42 per cent in 2001, according to The MarketPlace - it is worth checking the limited incentives available if you are trying to purchase your first home.

For a start, find out whether you qualify for affordable housing. People judged to be "key workers" - such as nurses, teachers, doctors and policemen and policewomen - qualify for a combination of subsidised rented housing and low-cost home ownership, including shared ownership.

If you are not a key worker but have a low income, you can apply for the Cash Incentive scheme, where grants are given to local authority tenants to help them buy their own homes.

Alternatively, you could try the Shared Ownership scheme. This enables buyers to purchase a share in a property and pay rent on the remainder to a housing association. The idea is that, over time, you gradually buy the remaining portion from the association.

First-time buyers who don't qualify for affordable housing or shared ownership may still be able to get help from a mortgage lender, their parents or their siblings or friends.