Tuesday, Mar 09, 2010
Must do better
The Telegraph: Number of first time buyers falls sharply
Miles Shipside, commercial director of Rightmove, said: "First-time buyers play a crucial role in keeping the market moving by helping to complete chains, and their continued absence delays any prospect of a meaningful market recovery."
Posted by devo @ 07:05 AM (1548 views) Add Comment
47 Comments
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1. paul said...
The BBC will headline "Snow keeps first time buyers away".
At some point, survival instincts of the market will kick in and everyone will realise tay to increase the volume of sales is by lowering the price. At some point.
2. estrader said...
@1 "Despite house prices falling by around 20pc between the autumn of 2007 and spring last year, first-time buyers are still finding it difficult to get on to the property ladder because of the large deposits being demanded by lenders in order for borrowers to qualify for their best mortgage deals."
Exactly Paul. I thought they would be saying "first-time buyers are still finding it difficult to get on to the property ladder because it was covered in snow and ice". If houses were a bargain at their current price there wouldn't really be a need to demand strict lending criteria. Don't the banks realise there is a shortage of houses in the U.K??? They better let people buy before they are all sold out, otherwise they will have nobody left to lend to!!
3. mark wadsworth said...
Buyers' strike. It's the only way forward.
4. flashman said...
"If houses were a bargain at their current price there wouldn't really be a need to demand strict lending criteria".
The latest capital adequacy requirements and Basel 11 largely dictate stricter lending criteria
5. brickormortis said...
They say this stuff like they were expecting something more! How can a first time buyer, without parental support save for a 10-15% deposit, particularly given that they are likely to be paying off student debt still and may not even have a job or even have a history of savings since it has been almost totally lost from our culture.
6. Neil B said...
"The drop in confidence is probably being driven by the recent run of house price rises"
What planet do these journos live on? Confidence isnt even a factor of why there are no FTBs; the simple truth is that there is no more credit available (to anyone) that supports the rediculous asking prices.
7. jack c said...
I can confirm a much tighter approach to lending - lots of people are effectively trapped as the lighter criteria applied on the original mortgage/loan no longer applies now. I've been a bit of a broken record saying how many people could afford to buy the house they are in if they were starting out again and the answer is very few in the current climate. This is evidenced by people coming off fixed rates wanting to re-mortgage however they have no option but to stay on the current lenders SVR (in the hope things improve ie prices rise and LTV puts them back into a favourable position). The knock out punch in all of this (IMO) will be a rise in interest rates.
8. flashman said...
People often talk about how the 'bank of mum and dad' must be nearing exhaustion. There are 12 million households in the country without a mortgage. It is likely that a good portion of the people attached to these 12 million mortgage free houses will also have assets and savings, other than their houses.
Not all the owners of these houses have a sibling who is about to buy a house but the sheer scale of this (12 million) number proves that the bank of mum and dad is in rude health. Realistically, this is where the deposits will come from. Another way of putting it is that it will mostly be kids from relatively wealthy backgrounds that are able to put down a deposit. Whether or not there are enough kids from relatively wealthy backgrounds to support the market at today’s prices is another topic
9. tyrellcorporation said...
Flash I think you're right there. I can see a steady and possibly exponential transfer of housing stock into the hands of fewer and fewer families. To some degree this has already happened over the last 5-6 years. Anecdotally, parents from the home counties who send their kids to university in Exeter are buying properties rather than renting them. They're looking at capital gains over the 3 years, rental income derived from student mates (more wealth transfer), enlargening of the family property portfolio and teaching their offspring that to really get ahead in the UK you must be savvy in the ways of the landlord.
People talk of a seismic shift in the make up of the UK hosuing market and I think that's actually a fair assessment. The dynamics of the market now massively favours the 'haves' at the exclusion of the 'have nots' and realistically I can't see how the 'have nots' will ever break into the market unless there is a major price correction.
10. estrader said...
I think we passed the "New Paradigm" phase a while back.
11. estrader said...
Anyway, for those who can't afford to buy a house I suggest you buy Internet stocks, I hear the "new economy" is going to have a big future!
12. wiltshire said...
I'd be surprised if the Bank of Mum & Dad has much steam left in it.
The BoM&D is just a reflection of the times. We've had a decade of financial exuberance where even the most luckless dimwit could make money without really trying. Now we're looking at a decade of austerity. I would imagine the BoM&D will continue to reflect the times. Many of the parents will now be realising they have quite a few years yet to live at a time their incomes will be naturally shrinking, at the same time the economy is coming under increasing pressure.
A lot of the BoM&D money has gone into an incredibly expensive housing market. As the old mantra goes, it's all fine as long as house prices are increasing. I bet there's many parents who have not only got a huge MEW-ed loan but who have either underwritten their child's enormous mortgage or who will be the child's first port of call when interest rates start to increase. And all at a time when there is actually more likelihood that house prices will start to dip again.
The destruction of the MEW-ed generation is just another story waiting to be played out across the business pages of the daily papers.
13. mark wadsworth said...
Flash, half of all UK houses are owned outright, this is true, but 'wealth' is incredibly unevenly distributed, so the vast bulk are not in a position to help their kids, short of remortgaging themselves (which hopefully rams home the point as to how futile Home-Owner-Ism is).
Tyrell: "The dynamics of the market now massively favours the 'haves' at the exclusion of the 'have nots'"
That is quite possibly the hidden agenda of Home-Owner-Ism. Well, either that or total crass stupidity.
14. flashman said...
mark w: Even if the bulk of the 12 million were not in a position to help out that would still leave perhaps a few million who are able. A few million is an awful lot. Obviously we need to get house prices down quickly to avoid this inequitable position
15. estrader said...
This is sounding more and more like a zero sum game. Parents depleting their savings to give to their children now have no money left to buy a holiday caravan or nice new zimmer frame. Now the caravan and zimmer frame manufacturers and sellers have less money to get a fancy new haircut etc..
16. mark wadsworth said...
F, it would indeed be rather pleasing if the few million at the top all mortgaged themselves up to the hilt to buy homes for their kids, as 'investments' etc and then house prices were to tank by 50%. That would be the greatest single redistribution of wealth of all time. All it needs is for the government to butt out and let the markets do their work.
17. letthemfall said...
I wonder whether it is possible to assess the amount of funds available which parents are prepared to sink into houses on behalf of their offspring. This is the only possible way I can see house prices staying high - the continued flow of free cash from the wealthy into this single asset, presumably on the grounds that you can't lose with houses. The upshot of this is a continued rise in inequality, effectively through the sequestration of housing. This may eventually play out and prices will subside again, though too late for many of us. The question is whether there is enough money out there prepared to do this.
18. Beaner said...
18 out of 54 sale instructions in the local town paper had no chain. the reluctant landlords and amateur btl's are starting to get very worried no wonder a 2003 new build 5 bed bought for 280k sold last month for 245k a 12.5% loss. the new buyers believe they have a bargain they could be in for a shock.
19. flashman said...
"Parents depleting their savings to give to their children now have no money left to buy a holiday caravan or nice new zimmer frame. Now the caravan and zimmer frame manufacturers and sellers have less money to get a fancy new haircut etc."
Not really. Many of the comfortably off, are ‘comfortable’ enough to buy (or contribute to) a house for their kids without making a serious dent in their wealth. The benefactors of this parental generosity will have more disposable income because of their reduced monthly outgoings.
20. bellwether said...
We are talking about wealth transfer before death - which happens a lot amongst the weathly to avoid Inheritance Tax.
It is also unclear how much debt/future liabilty free money there is out there, and to what extent the current bubble is in fact due to this phen, and therefore to what extent the phen is exhausted. Anecdotally (which is afterall what we are talking here) I suspect alot of city centre flats were part/wholly funded by parental money.
As an aside can I ask that we ban the expression the bank of mum and dad, one of the most effette expressions currently floating about . Inaccurate too at a number of levels.
21. flashman said...
letthemfall @16: It is an intelligent question because a good analysis of the numbers very often turns up something that gives a lie to slogans and sound bites. There is of course a subjective element to your question in that we can't really know how many of the relatively wealthy are 'prepared' to sink into houses on behalf of their offspring. Intuitively, I would say, most, because parents nearly always want to help their kids and also because people in this country are absolutely obsessed with house buying.
I dug up some numbers. They might provide some very general raw data for an assessment of how much money is available to help siblings onto the housing ladder. It would be helpful if anyone else could chip in some more specific numbers. At first glance there appears to be an awful lot of money floating about. It is worth noting that people who have savings and investments do not tend to have a lot of/any debt
There are 11.1 million households that have a mortgage attached to them and the average equity cushion enjoyed by these households is £52,500.
Approximately 12 million households have no mortgage at all.
Total private savings and investments in the UK total £1.7 trillion at the last count
22. flashman said...
"We are talking about wealth transfer before death - which happens a lot amongst the weathly to avoid Inheritance Tax"
Spot on. The current tax system has almost compelled the wealthy and the not so wealthy to regularly hand over a sizeable chunk (it is quite a generous amount and it can be done quite frequently) of money to their siblings. As long as the parent lives for a few years after the donation, then their is no tax on the transfer.
23. mark wadsworth said...
F, we can also assume that the parents will have to pay the interest on the mortgage they take out. That £1.7 trillion is unevenly spread - let's assume the richest 20% have 90% of it, that's half a million cash for the two or three million richest households, which was supposed to be earmarked for retirement. But by definition they can only subsidise the deposits for the children of the richest households (who probably don't need it as badly) and sooner or later this has to dry up.
But this is all wild guesswork - I think the only way to find out what happens is to wait and see what happens.
24. letthemfall said...
Thanks flashman.
I suppose another question is what is the typical value of total housing transactions per year. My v rough calc says about £25bn. So if that much (0.1% savings) heads for houses each year, that would maintain prices ?? Hope that's wrong
25. flashman said...
mark w: "But this is all wild guesswork - I think the only way to find out what happens is to wait and see what happens."
You're probably right but if it is only guesswork then a bit of anecdotal evidence can be useful…. I have a friend who has spent his entire life surrounded by relatively wealthy people. His parents only gave him money to fund 30% of the purchase price of his first flat when he was already working and therefore able to pay the monthly mortgage. Most of his friends received similar assistance but also, only when they were working. That seems to be the preferred system, so I'm not sure it is accurate to say "we can also assume that the parents will have to pay the interest on the mortgage". The same friends and his friends have also been receiving chunks of cash every few years from their parents to avoid inheritance tax. Consequently these people have found it easy to climb the property ladder and to amass wealth. They are now in a position to help their own children
This is why I often say that only fair legislation/tax (or very high unemployment) can put an end to this self-sustaining system
26. flashman said...
letthemfall: Sadly, there is not much wrong with your reasoning
27. inbreda said...
6. jack c said...The knock out punch in all of this (IMO) will be a rise in interest rates.
Agreed. Particularly as the stupidly low IRs are encouraging the BoM&D to put their money in places other than 1.0% savings accounts (i.e. to put it into property). And given that we are in a credit crunch you'd think the lack of supply of money would push up its worth. So the real question is - how do we stop the government from fiddling the situation to steal from the prudent to bail out the feckless.
Best I can think of is to go to saveoursavers.co.uk and register and get involved in some direct action. I think, set a reasonable interest rate relative to inflation, and organise for a complete withdrawal from all banks not supporting that rate. I am sick of sitting back and getting ripped off. I want to get all Greek on the governments ass (oo-er)
28. rumble said...
24. flashman said...letthemfall: Sadly, there is not much wrong with your reasoning
There is need for incentive to increase their spending of that wealth sufficiently to cover all departures from the market. Wealthy covering reduced volumes with a negative outlook? Don't see it.
29. mark wadsworth said...
LTF 22, that's a fair point.
In normal market 1 million houses bought/sold @ £180,000 average price = £180 billion. Those £1.7 trillion savings could, in theory, keep things going for ten years solid. Seem a bit unlikely though...
30. titaniccaptain said...
Might as well join in..........
A question.
How many out of the 12 million households are made up of the elderly facing nursing costs?
Claw-back by local authorities extends beyond the seven year rule of inheritance tax if the family home is gifted.
Would be good to get a breakdown of the age groups of said mortgage free households.
31. mark wadsworth said...
TC, out of the 12 million outright owners it's about 5 million pension age or over and 7 million under. Apparently a third or so of pensioners will need expensive long term care sooner or later.
32. flashman said...
rumble: "There is need for incentive to increase their spending of that wealth sufficiently to cover all departures from the market. Wealthy covering reduced volumes with a negative outlook? Don't see it."
You might not be able to ‘see it’ but they are most definitely doing it anyway. You have to understand that most people do not share your pessimism about the housing market. The only 'incentive' they need is their perceived certainty, that house buying is the financially sensible thing to do.
33. titaniccaptain said...
Thanks Wadsworth.....doesn't really make a huge dent in the figures except when you look at the psychological impact of those approaching retirement age who may think twice about releasing equity but then again it might spur them onto releasing as much as possible in order to pass something onto their children before the state gets their chunk from nursing care. As I have said before there is no greater rip off than than the fees facing the elderly for nursing care.
Two carers on just over minimum wage (not nurses) to 20 residents who live on pretty foul cost cutting food you wouldn't feed your dog and it costs a minimum of 600 quid per week per resident?
You can't beat value for money.
34. flashman said...
tc: "How many out of the 12 million households are made up of the elderly facing nursing costs?"
Mark has already answered that it is less than half but the leg-up will have been generally given to their siblings before the donors reach the nursing costs age. In any case, the £1.7 trillion in savings is an even better number to concentrate on than the 12 million householders without a mortgage. Handouts to siblings are very common and the numbers clearly show that there is the potential for this wealth transfer system to continue
35. titaniccaptain said...
oh.....another question.
Out of the 12 million households how many have loans secured against them? and do they exclude re-mortgages taken out after the mortgage has been payed?.....
Sorry to be picky but its good to get the full picture here so we know the nature of the beast.
36. titaniccaptain said...
Hi Flashman.
I agree. One hell of a lot of money still out there beyond anything I first envisaged. Again I am after many figures here and if any of you can help it would be much appreciated......so I will ask if anyone knows how much the "Bank of Mum and Dad" have payed in outright purchases or deposits for their children over the past 2 years....one way of working this out that could be the average amount gifted over a given period....lets say the past 10 years.
"the leg-up will have been generally given to their siblings before the donors reach the nursing costs age."...one problem is that claw-back can go back over an indeterminable stretch of time even preceding the age of retirement if the local authority believe that the gift was made to avoid costs.
37. flashman said...
tc:
"Out of the 12 million households how many have loans secured against them?"
A more appropriate question would be: "Out of the 12 million households, how many have also got significant savings". The answer is 'most' hence the £1.7 trillion in savings. Not many outright owners have large loans secured on their property. There is bound to be a few but not enough to matter.
"do they exclude re-mortgages taken out after the mortgage has been paid?"
Yes, the figures quoted most certainly exclude mortgages taken out after the main mortgage has been paid. A mortgage is a mortgage no matter when it is taken out and it would therefore always show up in these figures
38. flashman said...
tc:
"one problem is that claw-back can go back over an indeterminable stretch of time even preceding the age of retirement if the local authority believe that the gift was made to avoid costs"
Maybe we are talking about a different type of 'gift' but my accountant assures me that the cash gifts I have received over the years are completely immune from claw back or taxation. The gift of a house is different of course because it would probably exceed the allowance amount and it is a house, not money
39. rumble said...
Flash, "most people do not share your pessimism about the housing market" -- you mean optimism! Actually I'm fairly indifferent.
"they are most definitely doing it anyway" -- you have predicted a fall of ~7% (forget exactly) so i think we agree that they won't be covering it.
40. flashman said...
rumble: I am always taken aback that you remember things I said months ago. I should be honoured, unless of course you are one of those people with a photographic memory?
I think the 7% prediction was a bit of fun/total guess for braindeeds' quiz. If my life depended on an accurate answer, I would be extremely nervous because prices could fluctuate a bit either way. As you know, I don't believe that they will alter significantly unless unemployment gets nearer to the 3 million mark (or a miracle happens and the government imposes fair taxation/legislation).
41. titaniccaptain said...
@Flashman.
Two things. Yes inheritance tax I believe has a threshold of around £325k and anything over at 40% which then falls out of the estate over 7 years in different degrees.
The claw back I am talking about is not taxation it is to do with the local authority having rights to clawback gifted houses for nursing fees which has no seven year rule and goes beyond 15 years of the sign over of the property.
I will have to do a little digging on this and will try and find out more on this. Its something that my mother's social worker team brought up with me recently.
42. rumble said...
A bit of fun? Total guess? This is serious stuff! There are good men being harassed by women with uncontrollable nesting instincts!
Braindeed's quiz - that's right, I'd forgotten that.
43. flashman said...
tc: Yes, I was only talking about the cash gifts that parents can gift their siblings. That reminds me, I must give my Mother a call
The inheritance laws are so inconsistent. They allow one thing without penalty and manically claw back another
44. flashman said...
"There are good men being harassed by women with uncontrollable nesting instincts!"
Tell me about it
45. titaniccaptain said...
@Flashman
LOL
Brining up wills with your family can be incredible fun!!!!
"Now mother, thank you for bringing me up and putting up with my wayward teens which stretched into my mid 20s causing you endless grief I could not ask for a more understanding and loving parent. Oh by the way eerrrrmmmm can you sign everything over to me? because based on when Grandma and Grandpa died the turkey has more chance of making it to Christmas than you do......oh yes and happy mothers day"....lol
46. mark wadsworth said...
"There are good men being harassed by women with uncontrollable nesting instincts!"
Add me to the list. Do hens actually make nests? It would add a whole new meaning to 'hen-pecked'.
47. Wiltshire said...
Apparently there are about 24 million households in the UK. If 12 million are mortgage free does that include renting households or is it just 'paid off the mortgage/never had a mortgage, I inherited'?