First-time buyers are facing the perfect storm of housing issues – a shrinking stock of entry level properties, greater limitations on low deposit mortgage finance, lower incomes since the 2008 financial crisis and increasing house prices.
Property Famine
Rightmove reported an 80% leap in the number of property transactions in March as buy-to-let investors bought up cheaper homes at the bottom of the market ahead of an April tax hike. This has caused a housing drought for first-time buyers, sending prices spiralling.
95% Mortgage Restrictions
Back in 2014 when the Help to Buy mortgage guarantee was first introduced, around 4% of all mortgage lending was to borrowers with a 5% deposit. This has fallen to just over 2% this year.
House Price Hikes
According to Nationwide the average house now costs c.£206,000, an increase of £16,000 over the last 24 months. The picture in the South East is even bleaker with mortgage payments now representing some 35% of take home pay.
Take Home Pay Squeeze
Never an easy statistic to judge but on the Office for National Statistics own measures, pay went up by 0.9% in November versus the Consumer Price Index which rose to 2.1%.
Possible Solutions
Among 25-34 year olds, the rate of home ownership fell from 59% in 2003 to 37% in 2015, according to the Redfern Review led by Pete Redfern, chief executive of Taylor Wimpey.
Shadow housing secretary John Healey, who commissioned the report, said: “The shrinking opportunity for young people on ordinary incomes to own a home is at the centre of the growing gulf between housing haves and housing have-nots.”
The Redfern Review highlights a number of suggested policy options to help improve the opportunities for first-time buyers including;
- Help to Buy should be refocused so that it is targeted more exclusively at first time buyers and at lower price points on a regional basis – extending its term beyond 2021 for this restricted group.
- Starter Homes should be retained but on exception sites only and with the first time buyer discount retained in perpetuity
- More support should be given to programmes that promote savings among young people. The maximum scale of lifetime ISAs should be increased and consideration should be given to increasing the level of Government contribution
- The ‘one for one’ replacement policy for Right to Buy should be extended so that all council homes sold through the scheme are replaced, rather than just some of them
- Rental conditions for tenants should be improved whilst avoiding unnecessarily increasing landlords’ costs
Let’s hope that these do not get swept away in a flurry of Brexit divisions & no plan accusations as we head into Spring next year.