As 2016 progresses and house prices are continuing to rise, it is harder than ever to buy a new property, let alone get on the property ladder for first time buyers.
House prices rise but volumes have fallen
Property prices are up nearly 6% since November 2014, which takes the average UK house price to £186,325. With the average UK salary at £26,500, it will take three and half years to save to buy a house (putting down a 10% deposit) , if they’re saving 20% of their annual salary.
In some parts of the UK, house prices have risen up to 8%. The Rightmove property site is predicting a 6% increasein asking prices this year, adding £17,000 to the current average of £269,477.
To tackle the housing shortage issue, new building developments are continuing to increase, but it is unlikely that this will keep up with the rate of demand. Nationwide’s chief economist, Robert Gardner, said in his forecast that this could be a problem for would-be buyers.
First time buyers
2016 has been declared ‘The year of the first time buyer’ as transactions jump nearly 25%, according to the latest info from estate agents YourMove and Reeds Rains.
Government schemes should help those getting a foothold on the property ladder as David Cameron announced earlier this year that the government will directly commission 13,000 new homes. 40% of these new builds are set to be so-called “starter homes” aimed at first-time buyers.
It is not uncommon these days for people in their mid-twenties to still be living with their parents: a fifth of adults live at their childhood home until they’re at least 26, with 20% struggling to contribute financially.
For those who do move out, it is often to rent as buying is out of the question. The FT recently reported that Generation Rent is set to swell by a million over the next five years as house price inflation continues to outstrip wage growth.
Richard Sexton, Director of chartered surveyor e.surv, said, “For first-time buyers, 2016 may bring both opportunities and hurdles. Those looking to get on to the property ladder should be encouraged by consistent lending levels, but small deposit borrowers need to remain a priority for lenders.”
Help to Buy and mortgages offer hope
The Help to Buy scheme created by the government gives support for those who show willing to save. The Help to Buy ISA offers a 25% bonus on savings (save £200 a month and the government gives a £50 bonus), as well as equity loans for new builds and mortgage guarantees. So it isn’t all doom and gloom.
First Time Buyer magazine editor Lynda Clark agrees: “Help To Buy is a great scheme and has already helped 130,000 people move on to or up the housing ladder,” she says.
“For those who don’t want to buy a new-build, though, the return of 90 and 95% mortgages is particularly important…Obviously lending rates will vary at this level, but first-time buyers with a lower deposit will now be much more likely to find a mortgage.”
Mortgage approvals remained steady into the latter quarter of 2016. According to the Bank of England, November 2015 saw the number of approvals 3% above the average over the last six months.
E.surv’s Sexton said: “In the face of quickening house price rises, a healthy lending environment can only do so much.
“Mortgage lending is strengthening at a steady and healthy pace: vital for a sustainable future. So to make a dent in the housing challenge, buyers need more homes and more help from schemes like Help to Buy.”
Despite house prices on the rise, first time buyers should not be put off by the competition. There may be a lack of houses, but for those willing to save, there is the opportunity to get your hands on a government new build with a Help to Buy ISA. For those already on the property ladder, now may be a good time to sell your house and look to move up to the next rung with flats smaller houses being in high demand.
If you are selling or buying a hew house and would like a conveyancer who you can depend on for a fast and smooth service, with regular updates on the status of your case and no hidden fees, get in touch with When You Move.