UK first-time buyers and affordable property

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UK first-time buyers and affordable property

UK first-time buyers and affordable property

The UK economic performance over the last five years or so has been challenging to say the least with a near double-dip recession, massive austerity measures and national debt continuing to rise by over £100 billion a year. You would normally expect this kind of economic environment to place pressure on the property prices but over the last year we have seen significant interest in UK housing. This is placing more and more obstacles in front of UK first-time buyers who are now looking for affordable property which is thinner and thinner on the ground.

When you bear in mind that property prices in London increased by 7.1% over the last 12 months and 2.6% for England and Wales as a whole, this is the challenge ahead for first-time buyers.

UK economic growth

Prior to the recent burst in UK economic activity experts predicted 0.9% economic growth in 2013 rising to 1.5% in 2014. As a consequence of the recent boost in activity these figures have been increased to 1.2% for 2013 and 1.8% for 2014. Even though there is no doubt that the trend in UK economic activity is certainly up, there is also no doubt that even this type of economic recovery will offer very little in the way of assistance to UK first-time buyers looking to climb onto the property ladder.

At this moment in time the average property in England and Wales now costs in excess of £232,000. When you bear in mind that the average wage is anywhere between £25,000 and £30,000 a year, it does not take much to realise that first-time buyers are effectively being priced out of the “average” housing market. Therefore there is growing demand for affordable property right across the UK but unfortunately due to a variety of government cutbacks and economic challenges, the UK itself is well behind forecast requirements for affordable housing.

Quote from PropertyForum.com : “Official statistics from the UK authorities today confirmed that Britain has the fastest-growing population in Europe with a net increase of 419,900 between 2011 and 2012.”

Where do first-time buyers go?

The vast majority of first-time buyers, even if they were to combine top end incomes of £30,000 each for a couple, would still struggle to find a mortgage anywhere near the level required even after taking into account a potentially large deposit (which many people would struggle to find). As a consequence, at this moment in time more and more first-time buyers are looking to rent in the short term although in many ways this is compounding the problem of climbing aboard the property ladder. Additional rental demand has reignited the buy to let market which places yet more upward pressure on property prices.

There is an array of financial incentives available from the government for first-time buyers and there are also shared equity schemes on offer although they do have a downside in that a third party is effectively a part owner of your property. As house prices continue to push further and further ahead these shared equity schemes will become less and less attractive because they will require the third-party investors, often in the shape of some form of housing association, to take a larger stake in individual properties.

What does the future hold for UK first-time buyers?

At this moment in time when you bear in mind that the economy is only expected to rise by 1.2% in 2013 and 1.8% in 2014 and house prices even outside of London are nearing 3% growth – which is expected to continue for the foreseeable future – what hope do they have? The fact is that in what is becoming something of a self-fulfilling prophecy, we have seen a switch from homeownership to rental in the UK as fewer and fewer first-time buyers can afford to climb onto the ladder and are therefore forced to take alternative action.

We have covered time and time again the fact that the UK government, and previous governments, have in many ways manipulated new house builds and affordable housing to maintain demand for property going forward. While there is growing concern across some government departments, even if the authorities were to open the floodgates to new housing and affordable housing in the short to medium term, it would still take many years to catch up with the UK’s basic housing requirement.

First-time buyer levels in the UK are now roughly 50% of what they were prior to the economic crash in 2008 and it is difficult to see any significant improvement in this figure in the short to medium term.

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