Monday, May 22, 2006

You want to move? You can't afford to move!

this is money: Second time-buyers stay put

A study into second-time buyers, released today, has shown that it is not just first-timers who are struggling but also those who have already bought their first home and now want to move.

Posted by cupidstunt @ 08:40 AM (691 views)
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1. denzil said...

I was ranting on about this a couple of months back. The differential between each rung of the ladder is now financially too great for most to make. This is not limited to the second-time by but third fourth etc.

If an average second-time buyer home is 60% more expensive than an FTB-home then the 60% increase is only partially catered for by any equity that the FTB may have gained if she bought at least 4-5 years back. To make the jump will require a signicant increase in mortgage which most people just cannot make.

Another consideration is the amount of money in the housing market that MEW has syphoned off to other sectors thus making the value of property in the UK being only worth the (net value of property - MEW). If the MEW was invested and produced a high return then it could be syphoned back into property but I doubt very much whether a 4WD, plasma screen and a fortnight in Marbella are much use as bartering tools in a property purchase.

As an anecdotal experience a couple of friends who I might add have both progressed in their careers over the last few years wanted to move up as second-time buyers. They bought in 99 so have some equity in the property but to move up the ladder to a modest home required them to take out a very large mortgage. I know they are so stretched that even a little increase in IR's would really stretch them. I wonder how many are like them?

It's fair to say the property market is rapidly strangling itself.

Monday, May 22, 2006 11:17AM Report Comment

2. tyrellcorporation said...

Denzil, I agree, this is my rant too!

The idea of a 'ladder' is now a joke. I think FirstRung have it spot on - for most people, that is where they will stay even if they do mortgage themselves up to the hilt! There's nothing the VIs and the BBC like more than to talk about a magical place they call the 'housing ladder'. Like some ancient rite of passage, it's something wonderful that happens to people in their 20's and 30's. The reality is very different. The 2-up-2-down (which 'requires updating') you've spent a quarter of a million on is exactly where you will be in 10 years time!

As an aside, I like to add in my own names for local estate agents...

Milestone = Millstone
Scrivener & Reinger = Scrounger & Ringpiece
Fulfords = Filthy Fulfords
Anker (I kid you not!) = Just add an approprite letter...
Greenslade Taylor Hunt = Again, a simple letter replacement...

It's very childish but great fun and oddly therapeutic! :)

Monday, May 22, 2006 12:45PM Report Comment

3. George Monsoon said...

Just to add.. if second time buyers are stretched, spare a thought for the FTB's with no equity at all !

Monday, May 22, 2006 01:05PM Report Comment

4. denzil said...

>>spare a thought for the FTB's with no equity at all !

Exactly! CML state that FTB historically comprise 40-45% of property sales. The last thing I remember reading it that FTB now make up about 7% of the market.
In many ways the FTB is close to extinct and from this report it would seem STB are probably declining too.

BTL may have taken up the slack from the lack of FTB but BTL say they are in it long-term so eventually sales of FTB type houses will decline thus providing no food at the bottom "rung" of the ladder to feed the higher rungs.
Housing could develop into a very compressed market with those properties at rung 2 and above get pushed closer in price to rung 1.

Parts of the country may have witnessed a spring bounce but overall the property market is heading towards a period of being very sickly unless a correction occurs.

Monday, May 22, 2006 02:25PM Report Comment

5. talking rot said...

I agree with Denzil's post. Prices are too high for FTBs. Second-Time Buyers are priced out.

A friend of mine has a property portfolio of 11 properties, from flats to semis. He thinks it is great. If people can't afford to buy, then they have to rent. Easy cash for him.

I do wonder though. What ahppens when ex-FTBs can't afford to upgrade; and second-time buyers can't afford to be third-time buyers; and third-time buyers can afford to ....

What is the long term effect on the market. Is it permanent stagnation? Or, if no one can afford to upgrade, do prices fall?

Monday, May 22, 2006 05:38PM Report Comment

6. denzil said...

>>Or, if no one can afford to upgrade, do prices fall?

Either they fall or those that have made hay over the last few years (EA's, Surveyors etc) fall on their swords or they price the market accordingly to stay in business. At present there are too many EA's in some areas so a few need to go out of business. The problem currently is that the EA short on business will tell the vendor that she can get xxx more than the other EA told them.
Around my way there is an EA who is unofficially being accused of that practice. Strangely enough the EA handing out high valuations is selling nothing.

Tuesday, May 23, 2006 08:46AM Report Comment

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