A recent article came to my attention concerning the current state of home values and how they have now become up to 6 times in value of the average income. Fantastic for those of you that own their home, or are winding down the mortgage, however this is becoming a huge concern for our first-time buyers.
It is common knowledge by now that parents are being forced in to action to help their children in the quest to get on the illusive housing ladder, and in times gone by a simple 5% or 10% contribution could bridge the gap. However, how would you cope if you were asked for 15%, 20%, or even more?
That is the startling realisation that first time buyers face, because quite frankly their income will not stretch to allow them a suitable mortgage. And where else to bring this fact to life, but in our own town, Leigh-on-Sea.
Recent case completions have shown a steady rise in property prices within the SS9 postcode, and a family 3 bed semi-detached property has seen a rise towards the £500,000 bracket in some cases. To put this in to context for affordability a single applicant would need to earn around £100,000, have no significant outgoings, and have put together a £50,000 deposit.
The realisation that is facing many is to leave the area that they grew up in, and go in search of more cost-effective property elsewhere. The other option is to perhaps look down the ladder towards flats, with a 2 bed flat in the region of £250-300,000. However, the key question here is how sustainable is the equity growth? Can it keep improving on all property type? If not, then you could find yourself in a desperate equity struggle if prices dip.
It certainly poses food for thought, and the choice appears twofold, lower the expectations, or move away to a more cost effective area.
Rayleigh is showing strong promise, with a town in regeneration, and property prices at a more affordable range. Benfleet and Hadleigh are also alternative options, but without the thriving local high street attraction.
We watch on with intrigue to see the housing prices surge, and how this will play out. My personal worry is that there will become a gap that first time buyers will struggle to bridge. If prices continue then the 6 times value mentioned at the start of this piece may become 6.5/7. Quite what happens there I’m not sure. The FCA are unlikely to loosen the stringent criteria they have advocated since their last review in 2014. Rates cannot get much lower, so it is not something that the Bank of England can do any more to stimulate.
My advice? If you can afford to then get on the property ladder now, perhaps before you become priced out of the move. Otherwise you will be banking on enhanced savings that are being outstripped by the growth in property prices, or the ever-stretched bank of mum and dad.
Should you need to find out more about what mortgages may be available, or how much you can borrow, then simply get in touch.