The average property price for first-time buyers dropped by over 4% in the second half of 2007, according to Halifax. While this is great news for those who are trying to get on the property ladder, the credit crunch could affect your ability to get a suitable mortgage.
Lower prices
2007 saw property prices rise at a much slower rate than previous years, and Halifax's chief economist Martin Ellis predicts that house prices will be flat in 2008. In a slower market, sellers will need to be more flexible to attract a buyer - good news for first-time buyers who can negotiate using their chain-free position. This month, property analysts Hometrack reported selling prices 6% lower than asking prices on average.
New-build market
Anecdotal evidence suggests that an oversupply of new-build flats in some city-centres is leaving developers with unsold property on their hands. This could give first-time buyers a good opportunity to negotiate a more favourable selling price in these areas - but beware buying a property that could be difficult to sell in the future.
First-time buyer schemes
According to Halifax, key workers are unable to afford property in 70% of towns in the country, up 34% from 2002. Key workers looking to buy their first home have a number of options available to them - some new developments are only available to key workers in the area, and local government schemes may be able to assist you in getting on the property ladder.
Similarly, shared ownership schemes allow first-time buyers to buy a percentage stake in a property.
The credit crunch: mortgages
The Northern Rock crisis has prompted mortgage lenders to tighten up their lending conditions. Special offer mortgages for first-time buyers, such as those offering 100% equity, will be less frequently approved, and first-time buyers may need to save more as a deposit to put down before applying for a mortgage.
Last week's Bank of England interest rate reduction to 5.25% should however see lower rates offered by mortgage lenders.
Affordability still a problem
According to recent figures from RICS, affordability for first-time buyers has fallen by an astounding 351% over the last decade. RICS' senior economist David Stubbs notes that "conditions in the mortgage market need to improve if the thousands of would-be first-time buyers out there are going to be able to get their foot on the ladder."
How you could be affected:
Conditions in the mortgage market need to improve if the thousands of would-be first-time buyers out there are going to be able to get their foot on the ladder.
David Stubbs, RICS senior economist
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As a first-time buyer in an expensive area... I have always been on the margins of being able to afford my first home and until recently have watched the prices go up and up, hopefully now is the time to get on the ladder.
Jenny, UpMyStreet user
jules (Bath and North East Somerset), on 30/04/2008 at 20:46
Angela wrote:
paul m wrote:
Jane wrote:
I believe that property price rises are a bubble. comparable to the tech stock bubble. Furthermore, that the government rather cynically have used these huge house price increases as a way to make it seem as if the economy is growing, when in fact it is not. "Key worker" schemes are a nonsense and "part-rent, part-buy" not much better. It really is appalling that under a Labour government the main beneficaires have been property speculators and overseas property buyers while many people cannot afford just to buy a HOME!! In addition, many city bonuses have been made up by the huge profits from "sub-prime" loans and as those sub-primers lose their homes the City benefits. How cruel and what a mess now...
Reduce buy-to-let, offer REAL help in the form of loans/cash to first time buyers and those in social housing that could move on to private ownership.
we are in the process of selling our 2 bed semi house in derby for £129,950 we were buying a 3 bed house for £140,000
The sale to a first time buyer fell through a week before completion due to the buyer being optimistic about the current promised price drops of property in general.
we are now back on the market with a high chance of losing the £140000 onward purchase which was reduced from £155000 for a quick sale.
do we lower our price to £125000 for a quick sale or rent it out @ £500 pcm?, we own over 75?% of the the equity in this property
if we rented it out we would have two mortgages one for £80000 interest only and £90000 repayment
we would be paying out £420 and £500 we currently only pay out £211 rising to £340 (repayment @ 20 years) if we sold at £129950 and purchased at £140000.
what to do? sell cheaper/wait/or rent out?
the comment that keyworker schemes are a nonsense is rubbish....
i'm a key worker and had been renting in london for 5yrs where an average monthly rent is a minimum of £400 a month for a room in a flatshare over five years that works out as £24000.
I bought a flat through a keyworker scheme in 2005 where they owned 32percent and i owned the rest payed through a mortgage. i bought a two bed flat in lambeth sw london. for 145,000 and sold it eighteen months later for 195,000... making 40,000 profit. which i have been able to use as a deposit to buy a flat in a better area... had it not been for the key worker scheme contributing in the first place to help me buy the flat.. i would still be throwing money away now.
I believe that any flat bought in Greater london you will never really have a loss, as there is such a demand.. A property is only worth as much as you are prepaired to pay for it..without getting yourself into unnecessary debt... if for some people that means renting your property rather than sell in the current market for alot of people that is probably the best option rather than losing profit.
Currently its a buyers market not a sellers market... as buyers are in a better position to put in offers 15,000 grand less than the asking price, because people are panicing that no other offers will come along.. Now is not really the time to sell, unless your prepaired to lose money...
with all due respect the was £40,000 was made by buying at the right time during a boom period. The same boom period that meant key workers like yourself had to rely on schemes and part ownership deals to afford to buy into the market in the first place. I agree with the comment made previously, that its ironic that a labour government has created a whole new breed of "wealthy land owners".The affluence of self made and "lucky" buy to let landlords have made it now nearly impossible for hard working first time buyers to get into the market. House prices need to come back down to earth, not with a crash or a bang, just with a big wake up call.
Angela (Wandsworth), on 08/04/2008 at 21:09
paul m wrote:
Jane wrote:
I believe that property price rises are a bubble. comparable to the tech stock bubble. Furthermore, that the government rather cynically have used these huge house price increases as a way to make it seem as if the economy is growing, when in fact it is not. "Key worker" schemes are a nonsense and "part-rent, part-buy" not much better. It really is appalling that under a Labour government the main beneficaires have been property speculators and overseas property buyers while many people cannot afford just to buy a HOME!! In addition, many city bonuses have been made up by the huge profits from "sub-prime" loans and as those sub-primers lose their homes the City benefits. How cruel and what a mess now...
Reduce buy-to-let, offer REAL help in the form of loans/cash to first time buyers and those in social housing that could move on to private ownership.
we are in the process of selling our 2 bed semi house in derby for £129,950 we were buying a 3 bed house for £140,000
The sale to a first time buyer fell through a week before completion due to the buyer being optimistic about the current promised price drops of property in general.
we are now back on the market with a high chance of losing the £140000 onward purchase which was reduced from £155000 for a quick sale.
do we lower our price to £125000 for a quick sale or rent it out @ £500 pcm?, we own over 75?% of the the equity in this property
if we rented it out we would have two mortgages one for £80000 interest only and £90000 repayment
we would be paying out £420 and £500 we currently only pay out £211 rising to £340 (repayment @ 20 years) if we sold at £129950 and purchased at £140000.
what to do? sell cheaper/wait/or rent out?
the comment that keyworker schemes are a nonsense is rubbish....
i'm a key worker and had been renting in london for 5yrs where an average monthly rent is a minimum of £400 a month for a room in a flatshare over five years that works out as £24000.
I bought a flat through a keyworker scheme in 2005 where they owned 32percent and i owned the rest payed through a mortgage. i bought a two bed flat in lambeth sw london. for 145,000 and sold it eighteen months later for 195,000... making 40,000 profit. which i have been able to use as a deposit to buy a flat in a better area... had it not been for the key worker scheme contributing in the first place to help me buy the flat.. i would still be throwing money away now.
I believe that any flat bought in Greater london you will never really have a loss, as there is such a demand.. A property is only worth as much as you are prepaired to pay for it..without getting yourself into unnecessary debt... if for some people that means renting your property rather than sell in the current market for alot of people that is probably the best option rather than losing profit.
Currently its a buyers market not a sellers market... as buyers are in a better position to put in offers 15,000 grand less than the asking price, because people are panicing that no other offers will come along.. Now is not really the time to sell, unless your prepaired to lose money...
joanna (Telford and Wrekin), on 30/03/2008 at 04:45
me and my husdand have been renting for the past 2 yrs and have managed a small deposit of 8,000 pounds as a deposit for when the house slump kicks in.
we have seen a house that we both have fallen for .was on the market for 34,000 and we got him down to 23,500.fed up paying 600 pounds to my land lord and thinking of going for it.are we mad,shoud we wait?
Matt (Westminster), on 20/03/2008 at 11:51
What happens to the price of an asset when the money available to buy it contracts sharply? Of course the price of the asset also contracts sharply.
There is currently a 30% gaping hole in the funding available for UK banks to lend on mortgages- it has been a gaping hole since October, and given the increasing severity of the credit crunch this looks less and less likely to be filled.
I would strongly advise first time buyers not to make rash decisions when considering whether to buy a house - when prices are overvalued by all available measures and we are in deep levels of financial trouble.
Matt (Westminster), on 20/03/2008 at 11:49
What happens to the price of an asset when the money available to buy it contracts sharply? Of course the price of the asset also contracts sharply.
There is currently a 30% gaping hole in the funding available for UK banks to lend on mortgages- it has been a gaping hole since October, and given the increasing severity of the credit crunch this looks less and less likely to be filled.
I would strongly advise first time buyers not to make rash decisions when considering whether to buy a house - when prices are overvalued by all available measures and we are in deep levels of financial trouble.
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Azam (Ealing), on 16/03/2008 at 11:38
Being a first time buyer it is always difficult to enter into a property market, however if we analysis the current situation the property is still selling despite of the negative sentiments. With US sub-prime issue the big time investors will now be moving out and will be looking for a stable market, Indian economy and Chinese economy growth will bring investors from those market and oil averaging more than $100 will induce the middleeastren investors to slowly and gradually move into Uk market, and lastly Eastren European moving into this market. As per one forecast most of the big ticket properties are bought buy foreigners rather than our own people.
Hence as every market take correction our property market is due for correction which is 3-5 percent.
Bazz (Brighton and Hove), on 13/02/2008 at 09:47
does the market need first time buyers when buy-to-let investors are buying in their place?
Would that be enough to prop the market up?
Ruth (East Hertfordshire), on 13/02/2008 at 08:24
Key worker housing and shared ownership are NOT "nonsense" (and also existed long before 1997), wherever did you pick up that notion? I have friends, colleagues and clients (I work in social care) who use both these schemes to excellent effect. It's one thing to want to take a pop at a government you don't like, but get your targets right...
paul m (Amber Valley), on 13/02/2008 at 07:02
Jane wrote:
I believe that property price rises are a bubble. comparable to the tech stock bubble. Furthermore, that the government rather cynically have used these huge house price increases as a way to make it seem as if the economy is growing, when in fact it is not. "Key worker" schemes are a nonsense and "part-rent, part-buy" not much better. It really is appalling that under a Labour government the main beneficaires have been property speculators and overseas property buyers while many people cannot afford just to buy a HOME!! In addition, many city bonuses have been made up by the huge profits from "sub-prime" loans and as those sub-primers lose their homes the City benefits. How cruel and what a mess now...
Reduce buy-to-let, offer REAL help in the form of loans/cash to first time buyers and those in social housing that could move on to private ownership.
we are in the process of selling our 2 bed semi house in derby for £129,950 we were buying a 3 bed house for £140,000
The sale to a first time buyer fell through a week before completion due to the buyer being optimistic about the current promised price drops of property in general.
we are now back on the market with a high chance of losing the £140000 onward purchase which was reduced from £155000 for a quick sale.
do we lower our price to £125000 for a quick sale or rent it out @ £500 pcm?, we own over 75?% of the the equity in this property
if we rented it out we would have two mortgages one for £80000 interest only and £90000 repayment
we would be paying out £420 and £500 we currently only pay out £211 rising to £340 (repayment @ 20 years) if we sold at £129950 and purchased at £140000.
what to do? sell cheaper/wait/or rent out?
robin H. C. (East Riding of Yorkshire), on 12/02/2008 at 21:14
There is an interlink with credit cards. Basically the people who have bought houses on a fully leveraged basis are like everyone else using credit cards and normally near or at thir maximum limits.
Credit cards are charging upwards of 28%pa interest. (because they need the userous rates to enable them to collect the bad debts). The 28% interest enables their to be sufficient fat to enable the credit card companies to sel these debts to the collection agencies who in turn use professional credit card bounty hunters to hound the debtors. The debtor in order to get rid of the stress and hassle pays the minimums on the card (which does not reduce the debt) rather than their mortgage. The result is a gradual increase turning into a flood of defaults on mortgages.
Governments and financial institutions have been encouraging an ever consuming economy without exercising restraint wit respect to obvious credit risk.
Unfortunately the grups that have encouraged this situation will not be he persons who pay for it. The costs are going to be evident in increases in bad health, mental and otherwise, breakdowns in familly units and loss of jobs due to stress.
No simple answers here butI believe thaere are still laws on the books making userous interest illegal.
Perhaps these laws should be brought out of the closet.
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