First-time buyers thwarted by stagnant market

Homeowners’ reluctance to move house is having an impact on first-time buyers hoping to step onto the property ladder, reports Lloyds Bank.

What’s the latest?

Potential first-time buyers are being thwarted by a fall in homemovers as existing owners struggle to trade up the property ladder.

Homemovers accounted for just 51% of housing sales during the first half of 2017, down from 64% a decade ago, according to Lloyds Bank.

Only 171,300 existing homeowners bought a new property during the six months to the end of June.

Although the total was only 2% lower than in the same period of 2016, it was less than half the level seen in the first six months of 2007, before the financial crisis hit.

The steep decline in homemovers is contributing to the stagnant property market and making it harder for first-time buyers to get on to the ladder.

Why is this happening?

People’s reluctance to trade up the property ladder is likely to be due to a combination of the high cost of moving and the shortage of homes for sale.

The cost of the average property bought by a homemover has soared by 41% or £84,869 during the past five years, rising from £206,122 in 2012 to the current £290,991.

On top of this and other moving costs, homeowners will also have to pay more than £4,500 in stamp duty on a £290,991 property.

Even if they are happy to go ahead with a purchase, they may not be able to find a home to buy as the number of properties on the market remains close to record lows.

Who does it affect?

The shortage of homes for sale not only impacts those hoping to trade up the ladder, but it also has a negative effect on first-time buyers.

The fact that people are not moving on to bigger homes means their existing properties are not being put on the market, intensifying the shortage of homes for first-time buyers.

Sounds interesting. What’s the background?

Andrew Mason, Lloyds Bank mortgage products director, said current homeowners might be reluctant to move on for various reasons, including, “more people are paying off their mortgages, and the cost of moving house could be putting people off”.

The first half of 2016 saw 18,000 more homemovers, an increase of 11% compared to the same period in 2015. This increase may have been due to owners buying homes before the introduction of the new stamp duty charges for second and additional homes.

First-time buyers are not the only ones who need substantial deposits for a property purchase. Those trading up the ladder have seen the average amount they put down soar by 40% in the past five years to £96,109, a considerable rise from £68,663.

Unsurprisingly, Londoners had to get together the most cash for their next move at £188,916 – four times more than the £48,080 needed by those in Northern Ireland.

Next-time buyers in the capital also faced the biggest jump in the price of their next home, with average prices for those trading up the ladder soaring by 56% during the past five years to £561,032, followed by those in East Anglia and the south east who face a 52% and 51% hike respectively.


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