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Grin and bear it

  • 01/07/2002
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First-time buyers are not struggling as much as we have been led to believe, according to new resear...

First-time buyers are not struggling as much as we have been led to believe, according to new research from the broker Savills.

Despite huge increases to house prices, Savills has reported that property is more affordable than it was a decade ago (see news story on page 4).

Mark Harris, a director from Savills, commented: ‘Although current market sentiment suggests it is increasingly difficult for borrowers to step onto the property ladder, the research we have undertaken contradicts this.’

Without questioning the accuracy of the research, it fails to recognise the real affordability crisis facing first-time buyers.

For many borrowers, it is not the repayments but the deposit that is the problem ‘ especially in overheated areas such as London and the South East.

Tenants in London are already paying huge sums in rent. In desirable areas of London, you can expect to pay upwards of £800 a month just to rent a one-bedroom flat ‘ far more than the cost of the mortgage.

So although a steady reduction in interest rates has reduced the monthly cost of borrowing, it has not helped the frustrated tenant make the transition to home ownership.

House prices are rising faster than would-be borrowers can save their deposits and as a result, the average age of the first-time buyer has risen from 29 in 1974 to 34 in 2001, according to Halifax.

But perhaps the most telling trend is the reduction in purchases from young buyers ‘ the number of buyers under the age of 25 has fallen from 32% in 1988 to 11% in 2001.

Problems are not confined to public sector workers, there are now many would-be borrowers in their mid-20s, settled in their careers and earning reasonable salaries which they do not want to use to line their landlord’s pockets.

Even those with a few thousand pounds in the bank are still finding that home ownership is falling just outside their reach.

Shared-ownership is an option for some ‘ and something that is always worth applying for ‘ but with limits to housing association funds it will only benefit the lucky few.

Without winning the lottery, or lenders offering young earners unmanageable levels of debt, there unfortunately does not appear to be a universal solution.

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