2 August 2007The average price of a house has crossed £200,000 in the UK. This increase has broken a psychological barrier and has heightened the anguish of non-property owners. Their dream of having a house of their own has been chased away farther.
Problems Faced by First Time Buyers
- The problem of first time buyers is that they are no longer able to buy a house. Houses have turned unaffordable.
- House prices have shifted out of the grasp of even dual-income families.
- First time buyers are taking a long time to own a house of their own. In other words, these buyers are much older than the buyers who purchased a few years back.
- These new house owners are now expected to spend phenomenally more than the first time buyers of a decade back. As a result, the buyers of these times are heavily burdened by debt.
- Buyers today are spending about 204% extra than their counterparts who ventured into the real estate market 10 years back. But, income levels haven not increased in a similar manner. The difference between an increase in the house price and increase in wage rates stands at 110%.
- As the first time buyers are buying later in life, at exorbitant rates, they have to repay in lesser and heavier instalments.
- Older-aged first time buyers have added pressure on the rental market. Increase in demand without matching supply levels have forced the rent up.
- This has become a Catch-22 situation. A couple has to save more to buy a house. But, the increased expenditure (in the form of rent) reduces savings.
- With increase in demand for rental houses, investors are heavily investing in the buy to let segment. This demand from their side has further pushed up the house prices.
- Desperate people are now ready to take loans on higher rates of interest. They are overstretching themselves in their eagerness to not miss the property boom.
- Finally, non-property buyers are turning poorer. Their earnings or savings are not enough to enable them buy a house. Wealth is being transferred to the older generation
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