The credit crunch has taken a firm hold of the housing market, knocking the confidence of first-time buyers and bringing sales down to a sluggish trickle. But with the number of available properties rising and the lowest interest rates for years, could there be a silver lining for first-time buyers who are feeling the crunch?
The fact that more than half of Britain’s working population cannot afford to buy a home underlines the difficulties faced by first-time buyers trying to get on the property ladder today.
It’s little wonder when you consider the fact that the average house costs Â£118,500 and the average salary is Â£25,000, according to Nationwide Building Society.
On a more positive note, the number of houses available rose, giving more choice to potential buyers but the number of sales agreed remained sluggish, indicating consumer confidence is uncertain. It seems first time buyers aren’t giving up hope, though, as the number of buyers on books has increased, showing demand is still out there.
Stewart Lilly, president of the National Association of Estate Agents (NAEA), says: “The global credit crunch, the squeeze on mortgage approvals and the media cloud that currently surrounds the property market are undoubtedly having effect on individuals’ decisions to buy or sell. There is a constant need to remind people that the underlying factors that hold up the property market – low unemployment, historically low interest rates and a pent-up demand for houses – still exist.”
He insists its not all doom and gloom for first-time buyers as a number of NAEA agents across the UK are still reporting stable property markets, with many of their branches making steady sales.
“There are indications that first-time buyers have dropped their market share once again, showing a ‘wait and see’ attitude has been adopted. Over the next few months it is imperative that the shackles are released on the mortgage market so consumer confidence can be rebuilt, allowing the market to stabilise,” he says.
However, there is no denying that the current economic climate is piling the pressure on a majority of buyers and first-timers have really felt the impact. Their market share dropped from 11.7 per cent in February to 8.3 per cent in March. This is the lowest figure reported since April 2006 when their market share plummeted to 7.9 per cent.
It’s hardly surprising that buyers are feeling skittish about purchasing a new home when mortgage lenders are clamping down on offering fixed rates and 100 per cent mortgages, forcing first-time buyers off the property ladder.
This added pressure is clearly making new buyers more cautious about purchasing a home as the average number of viewings before a sale is secured actually rose from 13 in February to 14 in March 2008. This consumer caution is also reflected in the time taken to sell a property, with an average of 22 weeks reported in March compared with just over 20 weeks in February.
But despite all this doom and gloom there are some pluses to being a first-time buyer: interest rates are at their lowest for more than 30 years, lenders are competing strongly for your custom, and you won’t be part of a chain, which will make you more appealing to home sellers.