First time buyers

What needs to change to make first-time buyer property prices affordable?



The average first-time buyer house price stands at £207,693 – the highest on record – according to the latest Halifax First Time Buyer Review.

The review also found that the average house price for first-time buyers in London was £409,795 with the South East the next highest at £276,773.

Ten of the least affordable local authorities were in London, while seven of the most affordable areas were in Scotland.

So, how can property prices become affordable for first-time buyers so they can get on to the property ladder?

Addressing economic factors


Deposits for homes are preventing many from stepping on to the property ladder 

Stephen Burns of Adapt Finance, felt that despite interest rates being cheaper than ever, the deposit was the main hurdle that first-time buyers had to overcome.

“We are not going to stop inflation, nor force salaries up, so the main focus should be on help with deposits, which has been addressed somewhat in recent years.

“However, it is lenders who set what loan to value is acceptable and also what multiple of salary is used to decide what amount they would lend.

“I would welcome an easier and universal ‘guarantor’ system, whereby a parent could act as security for a deposit, as opposed to actually raising the amount in cash."

Michael Dean, principal at Avamore Capital, added: "The only way to make property more affordable is either to see large wage growth – which based on the past seven years looks unlikely – by seeing material falls in house prices, which could only be brought about by way of a heavy recession (which would likely see higher unemployment and would affect younger workers) or a material increase in levels of supply.

“The past 30 years have not been a good indicator for this to be realised in the near future and it appears substantial government involvement (either by relaxing planning or providing more funding to SME developers) is required to make this more of a reality."

Solving the supply problem 


A number of issues are preventing homes from being built 

James Bloom, managing director of development finance at Masthaven, felt the lack of supply could be a key reason as to why people were struggling to get on to the property ladder.

“Providing SME housebuilders with better access to funding, and improving the expensive and cumbersome planning process could accelerate the urgent process of building more affordable homes for first-time buyers."

Liam Brooke, co-founder of Lendy, also felt the housing crisis was partly a supply problem, which could only be solved by building more homes.

“One of the main issues preventing housing becoming more affordable for first-time buyers is the shortfall in new housing being built, and that’s partly caused by a lack of finance for developers."

Rico Wojtulewicz, policy adviser for the National Federation of Builders, wanted to see more competition and planning to be less complicated.

“This can be immediately achieved by enabling more deliverable planning permissions.   

“Direct action may be required – for example, the starter homes policy – but we must ensure that we’re tackling the existing barriers to deliverable supply before creating new ones."

Financial and government backing for SME developers


Should the government be supporting smaller developers?

Along with improving planning rules, Katy Katani, associate director for business development and marketing at Zorin Finance, felt the government had the power to turn the housing crisis around.

“…But only if they stop with schemes like starter homes – which only help higher earners – and start investing in homes that people on ordinary incomes can actually afford to live in.

“We need to plan for the right homes in the right places, build homes faster and diversify the construction industry.

“Delivering this requires a commitment from a wide range of stakeholders, including local authorities, private developers and lenders.

“SME developers need to be encouraged to build more, and local authorities to let them."

Liam believed that the big, listed housebuilders would always be able to secure bank lending for tracts of thousands of new homes.

“…But for the small and medium developers – who want to build 20 or 50 homes – there’s a real struggle for finance."

James added that specialist lenders were stepping in and trying to fill the void left by mainstream lenders.

“…But further liquidity in this market is clearly needed; meanwhile local government has reviewed planning development rights, but we’ve seen no fundamental structural changes in planning legislation – this needs addressing urgently."

Liam didn’t think the funding problem for smaller developers were necessarily the fault of the banks.

“…The regulations they have to operate under disincentivises them quite heavily from backing smaller-scale developments.

“Alternative lenders like ourselves are now playing a bigger role in getting spades in the ground, hitting the UK’s housebuilding targets, and making buying a home more affordable for first-time buyers."


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