Half of first-time buyers say house prices would need to fall up to 20% for them to consider making a purchase, new research claims.
A Uswitch survey of 2,000 renters who are looking to get on the property ladder found many potential buyers are still waiting for prices to drop before making offers.
Half of those surveyed who are not looking to buy in the next five years say house prices are holding them back, with the second biggest reason for not buying described as not being able to pay a deposit.
The comparison website’s poll found 49% would need house prices to drop by between 11% and 20% to make it more affordable, while 13% would need a steeper decline.
Overall, first-time buyers felt the recession would decrease their chances of owning their own home.
However, buyers under age 35 were the most likely to believe the recession would increase their chances of getting on the property ladder at 35%, while 40% of this cohort were the most likely to take advantage of further declines in house prices.
Older respondents, those over 45, were more likely to wait till the recession is over to buy.
Regionally, the North East had the highest percentage of prospective buyers who believed the recession would boost their chances of purchasing a home during the next five years at 36% whereas 48% of those in the South West said the recession would hurt their chances.
While the majority of first-time buyers are not planning to use any Government housing schemes to get on the property ladder, 30% of prospective buyers under 35 are planning to use either the First Homes Schemes or the Help to Buy Isa to get their feet on the property ladder.
The Mortgage Guarantee Scheme which has been extended to December 2023, proved to be another popular scheme amongst first-time home buyers with one in five people planning to use it.
Conversely, Shared Ownership was one of the least popular schemes amongst first-time buyers with only one in ten people planning to use it.
Kellie Steed, mortgage expert at Uswitch.com, said: “There is no doubt that it’s a challenging time for first-time buyers, despite a gradual fall in both property value and fixed-rate mortgages. Given that the average price of a home in the UK is currently £294,910, prospective buyers who are not yet on the housing ladder must save hefty deposits in order to qualify for the best interest rates.
“Declining house prices could mean now is an opportune time for some first-time buyers to make their first steps on the property ladder using one of the government’s home ownership schemes.
“While the Help to Buy Scheme ended for applicants in England in October 2022, the First Homes Scheme and Shared Ownership Schemes may be valid options for some. The Deposit Unlock Scheme has also been extended until the end of this year.
“It's feasible, however, that some first-time buyers will still find it more economical to purchase a home at the end of 2023, given that both home prices and fixed-rate mortgage rates are anticipated to continue dropping throughout the year.”
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First time buyers need to get their priorities right - work harder and save more. If you want to buy a house you need to make a lot of sacrifices, you can't have it both ways.
last year the average salary in the UK was £33,000 and the average house price was £294,000. But you go ahead and tell those first time buyers that they just need to work harder and save more, like there isn't a fundamental problem with the entire system.
I know plenty of people in their 20s and 30s who are buying a home
There have always been people who cannot afford to buy - always will be
When I was in my 20 I did not go on foreign holidays - city breaks - meals out - buy coffee ate £3 a time
I worked mega hours and saved money to buy a house
Even now we do not have sky tv
Netflix
Prime
For the past 10+ years, the housing market was fuelled in no small part by cheap mortgage debt; in turn, the average house price to average income ratio rose to a record level. The return to an era of more realistic interest rates will inevitably affect FTBs buying decisions.
A 20% fall in property prices (especially flats/smaller houses) will make deposits less onerous and mean lower mortgage debt - this is just financial commonsense. Confidence, on the other hand, is another important factor: FTBs (and existing home owners wanting to trade up) will be wary of buying in a falling market - not least because the fear of negative equity is particularly acute for FTBs. So if prices are going to fall by 20%, it would be better for this adjustment to happen relatively rapidly because once the market has bottomed out, it will not only benefit FTBs at that point, it will also help the market as a whole to recover, given that FTBs are frequently the first link in many property transaction chains.
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