For several years, there has been a great deal of concern about the difficulty people experience in taking that first step onto the property ladder. Skyrocketing house price inflation, at least in certain parts of the country, and a serious shortage of homes coming onto the market, combine to make home ownership a distant prospect for the younger generation. There have been several widely publicised measures introduced by the Government to help this category of house hunter. In this article, we ask to what degree these policies have helped, and whether first time buyers are feeling any more optimistic about their chances of buying their own home.
What are the Government’s policies?
Regular readers of Nethouseprices columns will recall the various central governmental policies designed to help first time buyers. Some, such as the Help-to-Buy schemes and the Help-to-Buy and Lifetime ISAs have been largely, but not entirely, uncontroversial. Others have garnered a great deal of criticism. The Stamp Duty surcharge on additional homes, for instance, was intended to level the playing field between investors and potential owner occupants, making it easier for private buyers to compete for affordable homes with landlords. Mortgage tax relief for landlords is also being tapered from April this year, a move that is also calculated to help first time buyers. Landlords are, understandably enough, unhappy with these policies, since they have a material impact on their livelihoods. Also, they rightly contend, all the anti-landlord measures in the world won't solve the basic problem that there just aren't enough houses being built.
With this in mind, Sajid Javid, Communities and Local Government Minister, recently issued a White Paper, containing proposals that are meant to dramatically increase the supply of houses. Even if adopted in full - and that's a big "if" - the White Paper's impact isn't likely to be felt in the next couple of years.
Has public policy helped first time buyers?
Latest figures, at least at first glance, suggest that the policies are working. In summary, they show that the number of first time buyers reached a ten year high in 2016, with some 339,000 purchasing their first home.
There is an important caveat to these statistics, though. First time buyers are now in their thirties and are taking out longer mortgages than their predecessors, so there is every likelihood that they will still be making their monthly house payments in their late sixties and seventies. This point aside, though, it does seem that the various initiatives are starting to help people buy their own home. Certainly, in a recent Nethouseprices column, we discussed the latest mortgage lending figures which indicated that first time mortgages and remortgage activity represented by far the largest proportion of home finance transactions. Buy-to-let and home mover mortgages seemed essentially to have stagnated. The Council of Mortgage Lenders attributed this disparity in the statistics directly to the policies listed above.
Full speed ahead?
Are young people starting to feel more optimistic about their home ownership aspirations? Well, the answer according to a recent Halifax survey is a pretty emphatic "no." The lender's headline finding, in its poll of 1500 18-34 year-olds, was that over 50 per cent are no more upbeat about their prospects of getting onto the property ladder. 65 per cent don't think they currently earn enough to move away from rented properties and a sobering 25 per cent of them don't expect ever to buy their own home, unless they receive an inheritance from parents or grandparents. Ten per cent of those surveyed said they would consider leaving the country to find a more affordable home.
What are the issues?
House prices in the UK are the biggest single factor. These, for instance, are the latest regional average house prices:
- East Anglia: £196,367
- East Midlands: £153,779
- London: £402,699
- North East: £124,117
- Northern Ireland: £115,269
- North West: £144,367
- Scotland: £137,188
- South East: £272,777
- South West: £200,465
- Wales: £133,730
- West Midlands: £159,742
- Yorkshire: £135,719
Since lenders typically require first time buyers to have saved between 5-20 per cent of the purchase price of a house for a deposit, this means that the UK average first time deposit is an incredible £32,000. This, of course, is a wholly unrealistic figure for the millions of young people on low and middle incomes.
Discussing his organisation's report, Martin Ellis, housing economist with Halifax, explained that many young people feel they are "running the financial gauntlet." This year, for example, wages are expected to stagnate and general inflation is forecast to reach 2.7 per cent, meaning there will be more pressure than ever on household finances. The rising cost of living could well mean that for many people saving towards a deposit is out of the question. Certainly, there are mixed signals about the direction of rent costs in the coming months but, whether they rise or fall slightly, they will continue to consume a considerable part of a family's income. Against this backdrop, it's understandable that so many young people are discouraged when it comes to their home ownership aspirations.
More to do
What is fairly clear is that more needs to be done to increase the supply of affordable homes, so it's to be hoped that the proposals in Mr Javid's White Paper are put into action sooner rather than later. Equally, though, there is a growing body of support for the notion that Britain needs to abandon its traditional preoccupation with home ownership and concentrate more on secure and affordable rental homes. Whichever approach the country ultimately takes, we have to hope that a working partnership between government and private enterprise can be formed to deliver a housing programme which is fit for the 21st century.
Visit the team at Nethouseprices again soon for our series of guides on property matters and for all the latest news and analysis of house prices in the UK and the wider property market.
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