Low equity levels continue to hinder those wishing to move up the housing ladder in the UK as the housing market remains flat, it is claimed. Second steppers are still bearing the brunt of the stagnant housing market, according to the latest Lloyds TSB Home Movers Review which estimates that there were around 319,000 home movers in 2012, largely unchanged from 2011.
Second steppers’ current equity position would account for just 7% of the price of a typical second stepper home, compared with almost half, 42%, in 2005. The review also reveals that the average home mover deposit in 2012 was £61,743, a rise of 59% from the average of £38,866 in 2002.
The lender says that as more time passes since the peak of the market and the subsequent fall in house prices in 2007 to 2008, a higher proportion of potential second steppers will have bought their first property when house prices had already fallen from their peak. Despite this, second steppers in aggregate still face considerable challenges.
The typical potential second stepper in 2012 would have bought their first home in 2008 and such a home owner is, on average, estimated to have an equity level of just £11,500, equivalent to 7% of the average price for a semi detached house at £162,170. With the average cost of moving estimated at close to £9,000, this level of equity leaves very little to put down as a deposit on the next home. In addition, there are also a number of potential second steppers who bought at the peak of the market in 2007 and many of these home owners are likely to be in an even worse financial position, often with negative equity. It may also be the case that some first time buyers who had bought before or after the market peak could also be facing problems moving along the property ladder.
Quote from PropertyCommunity.com : “Second steppers, that is those who are looking to move from their first home, have become stuck on the property ladder and are hardest hit by the UK’s subdued housing market, a survey shows.”
This situation is in stark contrast to 2002 when second steppers had an average equity level of £45,000, equivalent to 38% of the average price for a semi at the time. The South East is named as the least affordable UK region for second steppers with an average affordability ratio of 6.3, followed by London at 6.1. The West Midlands and East Midlands, both 4.0, are the most affordable regions for those in their first home looking to take their next step on the property ladder.
‘Even though many of today’s second steppers won’t have bought at the height of the market, many are still going to struggle to make that move up the housing ladder. House prices have been falling or flat for the past four years, and as a result many are still in a very low equity position,’ said Nitesh Patel, housing economist at Lloyds TSB. ‘The difficulties faced by aspiring second steppers are having a considerable knock on impact for potential first time buyers due to the resulting shortage of properties available on the market with housing chains proving hard to establish,’ added Patel.