Martin Roberts gives tips for getting on the property ladder
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Recent data from the Office for National Statistics (ONS) has found the current market best suited sellers, who can take advantage of rising house prices and enhanced demand from existing homeowners looking to relocate. Richard Dana, a property expert and founder of Tembo – a specialist family lending platform that helps families buy homes with low-interest rates – said first-time buyers encounter much more resistance. He revealed two reasons why they struggle to purchase a property and two that have helped some break the pattern.
House prices vs salary
According to Mr Dana, first-time buyers have been stung by a combination of rising house prices and stagnating salaries.
He said the “core problem” they face is that average house prices are now “eight times the average salary”.
Lenders are also currently failing to supply the money that buyers need to bridge that gap.
Mr Dana said: “Banks and building societies generally lend about half that, so around four times average salary – which means there is a huge affordability gap based on what people earn compared to what the prices of properties are.”
The next barrier in buyers’ way is the required deposit, which can prove tricky to put together.
Mr Dana said most would need to provide five percent at a “bare minimum”, and “many more” require 10 percent.
People using the Tembo service save roughly £27,000, an amount out of many people’s reach.
The platform recently discovered that more than one in 10 first time buyers couldn’t save during the pandemic, with many citing rent as the primary reason.
The Help to Buy scheme
On the other side of the coin are the rare few 21st-century first-time buyers who have successfully secured a first home.
For them, according to Mr Dana, the Help to Buy scheme has proven valuable.
Help to Buy is a Government-backed scheme that sees buyers receive a 20 percent equity loan for a new-build home, allowing them to focus on a five percent deposit and 75 percent mortgage.
People who want to use it should do so as soon as possible, as the scheme ends in April 2023 after eight years.
The Bank of Mum and Dad
One option not available to much of the general public is parental assistance.
Mr Dana said over-55s currently own “nearly 75 percent of all property wealth”.
The figures mean families have “significant opportunities” to “share some of the upsides in their property price”.
Many families don’t own property, however, meaning the option isn’t open to everyone.
Where have house prices grown the most?
People have relocated during the pandemic, according to recent data, which shows house prices have surged outside of London.
The Zoopla House Price Index shows that house prices have risen 7.1 percent overall, with surges across several regions.
Liverpool, Manchester, Nottingham, and Sheffield all saw their rates rise by eight percent or more.
The regions reported respective increases of 10.7 percent, 8.5 percent, 8.1 percent, and eight percent.
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