Posts with tag: first time buyers

First Time Buyers Will Need to Earn £64,000 to Afford a Home by 2020

Published On: April 14, 2016 at 11:21 am

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Prospective first time buyers will need to earn £64,000 a year to be able to afford a home by 2020, according to housing charity Shelter.

The organisation believes that generation rent will be stuck in a life of expensive renting, as the average house price grows far beyond the average salary.

The £64,000 annual salary needed to buy a house is an increase of almost a fifth on the £52,000 needed for a typical first time buyer mortgage in 2015, the research found.

On top of the £64,000 salary to cover monthly mortgage payments, a first time buyer will also need a deposit of £46,000 to purchase a home, with the average house price expected to rise to £270,000 over the next four years.

First Time Buyers Will Need to Earn £64,000 to Afford a Home by 2020

First Time Buyers Will Need to Earn £64,000 to Afford a Home by 2020

These figures are based on forecasts by Paul Cheshire, a professor of economic geography at the London School of Economics. He believes that UK house prices will increase by 23% by 2020.

The Chief Executive of Shelter, Campbell Robb, says the research comes as no surprise, given that over the past five years, the country’s housing crisis has seen house prices rise six times faster than the average salary.

“It’s no wonder people on ordinary incomes are being locked out of a home of their own,” he states. “With the situation only set to get worse, generation rent will be forced to resign themselves to a life of unstable private renting, and wave goodbye to their dreams of a home to put down roots in.”1 

In March, thousands of people marched through London to protest against the Government’s proposed Housing and Planning Bill.

The Government insists that the plans will turn generation rent into generation buy, but campaigners believe that it will make it more difficult for people to access genuinely affordable housing.

Lobby group Generation Rent believes that the legislation will only help landlords.

A spokesperson for the Department for Communities and Local Government says: “The housing bill makes sure we make the best use of social housing based on need and income, while reinvesting in building new homes.

“Furthermore, we have set out the biggest, boldest and most ambitious plan for housing in a generation, including £8 billion to deliver over 400,000 affordable homes.”1

Separate research highlights the struggle that first time buyers in London are set to face.

The average London house price is currently ten times the average salary. By 2025, just 26% of people aged 20-39 expect to own their own home in London – the opposite of what was seen in 2000, when 60% of people owned their own homes.

What do you think needs to be done to resolve the housing crisis and help young people get onto the property ladder?

1 http://www.independent.co.uk/news/business/news/housing-crisis-first-time-buyers-will-need-64000-salary-to-afford-an-average-home-by-2020-shelter-a6982386.html

Rental Demand Looks Set to Remain Strong

Published On: March 21, 2016 at 3:21 pm

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Landlords need not worry about rental demand waning, as new research indicates that private tenants are set to remain in the private rental sector for many more years to come.

Rental Demand Looks Set to Remain Strong

Rental Demand Looks Set to Remain Strong

Hamptons International has found that it will take no less than 46 years for an average single Londoner to save a 15% deposit to buy their first home.

Using figures from the third quarter of last year, Hamptons found that it takes the average single buyer in the UK 13-and-a-half years to save a 15% deposit, without assistance from their family.

Regionally, those in the North East are able to save for a deposit the quickest, with single buyers having to wait just under eight years.

Buying a home with a partner or friend is the best option for young buyers, as it cuts the time to save significantly. For the average couple working full-time, it will take three-and-a-half years to save a 15% deposit across the UK. In London, it takes eight years, while buyers face just two years of saving in the North East.

Therefore, it is unsurprising that the Help to Buy: London scheme received so much interest in its first few days.

The Help to Buy ISA scheme will also help reduce the time it takes to save for a deposit. The Government bonus of up to £3,000 will cut the time a single first time buyer must save for by between nine and 12 months, believes Hamptons.

Additionally, the introduction of the Lifetime ISA, announced in the Budget 2016, will help savers even more. First time buyers in England and Wales will be able to save almost three years faster using the ISA. In London, they can save a huge 19 years faster.

Despite this, it is clear that many households will be forced to stay in the private rental sector for many more years.

Hamptons assumes that households can save 22% of their income, after spending on accommodation, utilities and food.

And while single first time buyers may be able to save in the long-term, there are currently just 16 areas where they will be able to afford their own home.

Will the Private Rental Sector be Out of Reach for Many in the Future?

Published On: March 10, 2016 at 12:23 pm

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Worrying new research suggests that spiralling rent prices and high deposit requirements will put even the private rental sector out of reach for many in the future.

It is well known that young first time buyers are struggling to get onto the property ladder, but now Money.co.uk has estimated that in ten years’ time, the average rent deposit could hit £1,111 – a huge 70% of the average Briton’s monthly income of £1,576.

In London, deposits are expected to rise to £2,733 – a whopping 120% of a Londoner’s average monthly salary of £2,281.

Will the Private Rental Sector be Out of Reach for Many in the Future?

Will the Private Rental Sector be Out of Reach for Many in the Future?

The website believes that private landlords will require a deposit equivalent to six weeks’ rent by 2026, while monthly rent prices will go up by over a quarter (28%) to £1,111 over the same period.

Overall, rent price growth is expected to exceed average monthly salary inflation across the UK, which is estimated to increase by just 20% in the next decade.

Money.co.uk predicts that deposits will increase significantly across the whole of the south of England.

In the South East, the average deposit is expected to reach £1,469 by 2026 – over four-fifths (83%) of the average monthly income of £1,761, and up from 72% in 2015.

Meanwhile, in the South West, the average deposit is set to be equivalent to 80% of the average monthly earnings by 2026, up by 14% from 66% of the average salary in 2015.

The Editor-in-Chief of Money.co.uk, Hannah Maundrell, explains the forecast: “The rapid rise in deposits as well as rents is a double blow for everyone on the rental ladder.

“With the forthcoming changes to tax legislation and crackdown on buy-to-let mortgages likely to erode landlords’ profits, there’s little doubt these costs will be passed on to tenants.

“The current booming property market means deposits are likely to continue shooting upwards in the future, and we could well see six weeks’ worth of rent extended to eight.”

She continues: “Tenants are stuck between a rock and a hard place, and the situation is only likely to get worse. Many not only face being priced off the property ladder, but also the rental ladder too. This could force people to borrow the extra cash they need for a deposit on loans or credit cards, pushing up the cost and creating a perfect storm for a major renting crisis. Maybe the bank of mum and dad should prepare itself for another withdrawal? Or, we could see many left with little choice but to live with their parents well into their 40s.”

Maundrell insists: “The Government needs to take action; without intervention, the spiralling cost of deposits and rent could have a huge economic impact on the UK. Giving renters a lifeline is equally as pressing as helping people buy a house. Taking steps to address this now could be a far easier solution than dealing with the prospect of pricing home hunters off of the private rental ladder.”1

How do you see the upcoming changes to landlord finances affecting how you set your rent prices and deposit requirements?

Advice for landlords on setting the perfect rent price can be found here: https://www.justlandlords.co.uk/news/setting-perfect-rent-price-property/

1 https://www.landlordtoday.co.uk/breaking-news/2016/3/are-people-being-forced-off-the-rental-ladder

 

Rush in BTL activity sees FTB enquiries slide

Published On: March 9, 2016 at 1:48 pm

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Latest figures released by comparethemarket reveal that the ongoing buy-to-let surge is seeing many first-time buyers squeezed out of the market.

Many would-be buyers are struggling to make their way out of rental accommodation and onto the housing ladder.

Growth

Data from the analysis shows that the proportion of buy-to-let mortgage enquiries rose by 4.4% to stand at 18.2% of the total number of enquiries during the last year. Annually, the proportion of enquiries for initial buyers fell by 3.7% to hit 23.5%.

In January of this year, there was little sign of the market reducing. Year-on-year growth for the month stood at 16%, with a 62% increase in comparison to December.

Despite buy-to-let investors rushing to beat the new stamp duty deadline on all purchases from April 1st, comparethemarket said there is, ‘little expectation’ of buy-to-let enquiries outstripping the number of first-time buyer enquiries.

Rush in BTL activity sees FTB enquiries slide

Rush in BTL activity sees FTB enquiries slide

Risk to stability

Jody Baker, Head of Money for comparethemarket.com noted, ‘the buy-to-let market has been subject to both extensive discussion and criticism over the past year with even the Bank of England’s Financial Policy Committee labelling it a risk to the UK’s financial stability.’[1]

Baker feels that, ‘this data only reinforces the view that over the past year, families and others looking to get a foot on the housing ladder are being priced out by landlords.’ Concluding, Baker said that it was, ‘great to see the Government take action in the Autumn Statement, but time will tell as to what the material impact will be on the market after 1st April.’[1]

[1] http://www.propertyreporter.co.uk/landlords/btl-boom-sees-ftb-enquiries-dr0p-37.html

Buy-to-let investors rushing to beat deadline, but will it last?

Published On: March 6, 2016 at 11:40 am

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Buy-to-let investors are rushing to complete deals before the stamp duty changes on April 1st, according to new data from the Nationwide.

The firm’s house price index reveals that there has been a large rise in mortgage approvals, which reached a two-year high in January. Data also shows that prices increased on average by 0.3% in February. Growth for the year also increased by 4.8%.

Up and Up

Robert Gardner, Nationwide’s Chief Economist, noted, ‘the number of mortgages approved for house purchase increased sharply in January to almost 75,000, up from around 71,000 approvals in December and the highest number since January 2014.’[1]

‘However, much of the increase is likely to be related to the impending increase in Stamp Duty on second homes which is due to take effect in April 2016. This is likely to have brought forward a significant number of purchases, which in turn will probably result in a fall back in approvals during the spring/summer,’ he continued.[1]

Race

Jonathan Hopper, managing director of Garrington Property Finders, observes, ‘the race is on for second home and buy-to-let buyers to complete before April’s stamp duty hike. The resulting spike in demand sent the number of mortgage approvals surging in January and has sparked high levels of competition for typical buy-to-let properties-flats and terraced houses in popular rental areas.’[1]

Looking to the future, Hopper asked, ‘what will happen once the stamp duty scramble is over?’ He believes that, ‘the chronic shortage of supply is likely to continue nudging up prices, even after the pre-April stimulus fades.’[1]

Buy-to-let investors rushing to beat deadline, but will it last?

Buy-to-let investors rushing to beat deadline, but will it last?

Speed bump?

‘It’s hard to know if the April stamp duty deadline will be a speed bump for the market or a speed boost,’ states Mark Posniak, managing director at Dragonfly Property Finance. ‘Demand from buy-to-let investors will fall away during March but first-time buyers could arrive in numbers.’[1]

Posniak feels that, ‘the age-old opponent of first-time buyers, the landlord, has effectively been red-carded and the playing field is now theirs.’ He went on to note, ‘as the buy-to let purge starts in earnest, the appallingly low home ownership rate for younger people may well pick up. With the Bank rate seemingly set in stone for 2016 and people confident about their jobs, demand is unlikely to wane.’[1]

‘The ebb and flow of the property market is difficult to predict at the best of times but with the possibility of Brexit and the April stamp duty change impacting landlords, its bordering on the impossible,’ he concluded.[1]

A storm brewing

However, Alex Gosling, CEO of online estate agents HouseSimple.com feels, ‘this could be the storm before the calm. February house price growth is being driven by the buy-to-let gold rush-investors trying to get in before the stamp duty hike. March is likely to be more of the same, as time is running out. It will be interesting to see what happens in April, which is historically a buoyant time for the housing market. We are walking into the unknown and there’s a chance that demand will drop like a stone.’[1]

‘With less buy-to-let investors snapping up properties from beneath the noses of traditional home buyers, we could well see a surge in first time buyers coming to the market. Home buyer demand has always been there, but they have often struggled to compete against committed investors, many of whom can buy for cash. Now they’re fighting on a more level playing field, we could well see the drop off in investor numbers replaced by a surge in first time buyer numbers,’ Mr Gosling added.

[1] http://www.propertyreporter.co.uk/finance/the-race-is-on-for-btl-investors.html

First Time Buyers Must Earn £11k More Than the UK Average to Get on the Property Ladder

Published On: March 3, 2016 at 9:42 am

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The difference between the average UK salary and the income that first time buyers need to get onto the property ladder has hit a post-recession high, according to research conducted on behalf of mortgage insurer Genworth.

First Time Buyers Must Earn £11k More Than the UK Average to Get on the Property Ladder

First Time Buyers Must Earn £11k More Than the UK Average to Get on the Property Ladder

Analysis of Office for National Statistics and Council of Mortgage Lenders figures shows that the average income needed to acquire a first time buyer mortgage is £38,977 – a huge £11,332 higher than the average UK salary of £27,645.

This is the greatest difference recorded since the recession, indicating how access to homeownership in the UK has become increasingly limited. It also signals how and why the private rental sector is likely to grow in the future.

Yesterday, we revealed that 30% of all households will rent from private landlords in 30 years’ time.

The difference in income needed and the average salary has grown significantly in recent years, due to stricter lending criteria and soaring house prices. Many prospective first time buyers will now have little chance of getting onto the property ladder without support from a partner, family member or Government scheme.

In fact, it was recently found that just 16 parts of the country are affordable for single first time buyers.

Comparatively, the gap between the income needed for a first time buyer mortgage and the average UK salary in 2000 was just £3,170 and £7,505 in 2011.

In London, the average salary needed for a first time buyer mortgage is almost £58,500, or 65% more than the UK average. Compared with regional salary growth of just 1.3%, the incomes of first time buyers have increased by 19.4% in the capital.

This means that the difference between the salary needed for a first time buyer in the capital and London’s average is £23,142, more than double the gap in the rest of the UK of £11,332.

This is 3.9 times more than in Yorkshire, where the income needed for a first time buyer and the average salary is the smallest gap.

It is therefore unsurprising that in the first ten days of the Help to Buy London scheme launching, a huge 15,000 hopeful buyers showed interest in the initiative.