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The Housing Market and First-Time Buyers – Underlying Problems

The Housing Market and First-Time Buyers – Underlying Problems

The August Housing Market Report published by the National Association of Estate Agents (NAEA) revealed two phenomena of particular note. Firstly the report showed that home buying amongst members of the age group of 18 to 30 remained at an all-time low level. Only 3 per cent of all sales made by the NAEA agents were to members of the 18 to 30 age group.

Similarly the report showed that there was a rise in the number of first-time buyers across the month – a total of 28 per cent of all sales made during August were to first-time buyers, up from 20 per cent in July and the first time the figure has risen since April. Within these first-time buyers the largest proportion was members of the 31 to 40 age bracket, who made up 45 per cent of the sales to first-time buyers.

The first development confirms a well-known and worrying trend. House prices remain well- beyond the means of younger people, irrespective of their employment and financial background. Demand in the rental sector across the UK is rising constantly, and record levels of young, employed people still live with their parents – the Office for National Statistics suggests that 3.3 million 20 to 34 year-olds were living with a parent in 2013, a 25 per cent increase compared to the figures for 1996.

The knock-on effect of younger people being priced out of the market is a potentially crippling level of debt that must be borne by many well into the future. Forecasts suggest that those who have not joined the property ladder by 29 will still be paying off their mortgage by the age of 67, with their property repayments damaging their capacity to support their family in the future, especially when their children, in turn, come to want somewhere to live.

So there are two ways of looking at the second phenomenon in the report – that the increase in first-time buyers in the 31-40 age bracket is positive in that younger people are getting themselves onto the property ladder in increased numbers, but it also reflects market conditions working against the 18 to 30 age group.

The underlying problem in the housing market is that the supply of houses is not keeping up with demand, so prices increase and further prevent the chances of younger people buying property. There is a demographic shift, perhaps, too, as people marry later and so only pool their finances into buying a property to settle down in during their 30s.

Government plans unveiled at the Conservative Party Conference in September to build a further 100,000 homes on brownfield land specifically for first-time buyers under the age of 40 at prices of 20 per cent under the market value would only represent a start towards tackling the problem.

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