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First-time buyers commit to homeownership despite pandemic

The pandemic has strengthened the resolve of first-time buyers who have become more determined to follow their homeownership dreams and save more to get a foot on the housing ladder according to new research.

Three in five (61%) of respondents said that buying a home is more important to them now than it was at the start of the pandemic in March. The research, commissioned by Yorkshire Building Society, shows that over a third expected to buy their home sooner due to the pandemic and nearly half said they had been able to save more for their deposit as a result of the impact of COVID-19.

The research shows that buyers still face challenges when securing their first home. With the average monthly saving for those wanting to buy their first home now standing at £336, Yorkshire Building Society has estimated it will take a single person seven years and five months to save a 15% deposit for the average first-time buyer home, which is valued at £198,512.

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In order to meet the demands for a higher deposit, half of first-time buyers are looking for financial help from relatives. The number seeking support increases to 59% for those buying in the capital.

Ben Merritt, mortgages acquisition manger at Yorkshire Building Society, said: “Getting on the housing ladder seems to be more important now than it ever was. Whether it’s being in shared rented accommodation whilst juggling home and work life, or spending lockdown back in the family home, the pandemic has clearly increased the resolve of first-time buyers who have increased their savings and are more determined than ever to buy their first home.

“It’s a real priority and life ambition for many people, but getting there still remains a challenge which is why we are seeing many lean on relatives for support with deposits. Despite the lower availability of higher LTV products, there are options available to first-time buyers and so it pays to do your research to help you get the support you need.”

Source: Property Wire

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Majority of Renters No Longer Prioritise Homeownership

Owning a home is no longer the main financial priority for most renters in the UK, according to ING International.

A recent survey conducted by the global financial firm found that 82% of British renters prioritise at least one other life goal above becoming a homeowner. These include starting and raising a family, paying off their student debt or travelling the world. But for many Brits, owning a home is still an important life goal, with just 8% saying they never want to be a homeowner.

However, the survey revealed that 79% of people in the UK believe it is getting even more difficult for first-time buyers to get onto the property ladder. 71% also believe that owning a home is financially better than renting.

80% of respondents said that high prices are a barrier to owning a home, while 71% claimed that debt burdens were preventing them from getting on the housing ladder. Meanwhile, 58% said that worries about changing interest rates make them cautious about buying a property.

Looking ahead, Brits don’t seem to be optimistic about improved chances of getting on the housing ladder. 43% of those asked believe house prices will continue to rise this year, while 58% believe the UK housing market is on the ‘wrong track’.

This is down from the 50% of people who believed the housing market was on the ‘wrong track’ back in 2017. Just 25% of people today believe it is on the right track. The biggest reasons people gave for their lack of faith in the market was the dearth of affordable local housing, with 82% citing this as a factor.

“Lots of us want to own our own home one day,” said Jessica Exton, a behavioural scientist at ING. “Not only because it’s considered to be a smart financial decision, but because homeownership is an emotional and personal goal. But houses are expensive, and many perceive them as only becoming more so.

“Some are consequently taking longer to save their deposit and buying later in life. Given these extended timeframes, it’s not necessarily surprising that many are finding additional reasons to spend and save in the shorter term. Funding travel today, while planning to buy a home soon, for example.”

Julien Manceaux, senior economist at ING, said: “Consumers are reactive to changes in housing costs. Since 2014, the European Central Bank’s quantitative easing policy had a direct impact on national housing markets. It sent interest rates on mortgages to unprecedented lows. The drops between 2014 and the time of our survey are above 1 percentage point in most countries.

“This increased the borrowing capacity of many potential buyers and thereby improved market affordability. And we now see that slightly fewer people agree that for first-home buyers it is increasingly difficult to buy, especially in those countries where interest rates dropped the most.

“Potential interest rate changes are a commonly cited ownership deterrent and this change appears to have impacted survey responses. Eurozone citizens seem to feel ECB’s policies in their lives after all.”

Source: Money Expert

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Can this solve the UK’s chronic housing shortage?

The growth of the buy to let market has locked over 2 million families out of homeownership, preventing younger generations the chance to become part of the property owning democracy, according to a new report by the campaigning think tank Onward.

The report authored by leading Conservative MP, Neil O’Brien, argues that the government should limit the demand for property as an investment with a crack down on landlords tax relief for future rented properties. The paper also calls for councils to be given more powers to limit overseas purchases of new homes. At the same time, the think tank calls for a radical set of policies need to be implemented to increase the supply of new homes.

 The report exposes the sheer scale of problems which have built up in Britain’s housing market, driving the decline in homeownership over the last 15 years. New analysis in the paper reveals that:

France has built roughly twice as many new homes each year as Britain since 1970. France built 7.8 million more homes than the UK between 1970 and 2015 – a difference equivalent to every home in Greater London, Scotland and Wales put together. As a result, real house price growth in France has been just half the rate the UK and the proportion of people who spend more than 40% of their income on housing is less than half the rate in Britain. Some densely populated countries like the Netherlands built at an even faster rate than France.

The cost of renting has risen dramatically and nearly half of young men are now forced to live with parents. New analysis from the House of Commons Library included in the report shows that from the 1960s to the early 1980s private renters spent on average around 10% of their income on rent in most of the country, and around 15% in London. Today they spend over 30% and nearly 40% respectively. Meanwhile between 2000 and 2017, the number of 18-30-year-olds living in their parents’ home increased by about 1.1 million. Nearly half (48%) of men aged 22-26 now live with their parents.

Developers and landowners are benefiting most from the current system. Between 1950 and 2012, 74% of the increase in Britain’s housing costs was accounted for by increases in the cost of land. The value created when planning permission is granted overwhelmingly accumulates to developers, meaning communities are missing out on up to £9 billion of land value uplift created each year. Meanwhile many large developments go ahead without anything being contributed anything to the wider community. 7% of developments of over 1,000 homes had no developer contributions charged on them in 2016/17. For developments of between 100 and 999 homes, 26% made no contributions.

The growth of buy to let has locked 2.2 million families out of ownership. If the ratio of privately rented to privately owned homes had remained the same between 2000-2015, and we had built the same number of homes, we would have ended up with 2.2 million more homes in owner-occupation.

The report argues that while building more homes is important, homeownership is unlikely to return to previous levels without action to stem further growth of the rented sector. It notes that while the number of privately-owned homes has grown by 165,000 a year over the last decade, ownership has still declined because this has been outweighed by the 195,000-a-year growth in the number of properties in the private-rented sector.

Source: London Loves Business