When Lauren Cleak and her fiancé, Chris Stevenson, looked around for a place
to buy in southwest London eight months ago, they were disappointed by the
lack of options on their limited budget. The couple gave up their
half-hearted search for a first home and resigned themselves to spending the
early years of their marriage in rented accommodation.
“We felt we’d never be able to afford anything of our own,” said Cleak, 28, a
PR director for the fashion company my-wardrobe.com. Then, all of a sudden,
house prices began to fall, sellers became desperate and things started to
look promising. “We knew we were in a better situation in the market than
ever before,” she says.
In December, they took full advantage of the depressed market conditions and
bought a two-bedroom flat in Wandsworth for £385,000. At the height of the
boom in 2007, it was on sale for £520,000. “The asking price was £425,000,
but the sellers had already exchanged on another property, so they quickly
accepted our lower offer,” she says.
Cleak, who moved in last week, is still surprised at how easy it all was. “I
thought it would be much more stressful, but we were only looking for three
weeks,” she says. “It’s something we’ve wanted to do for a while. With
renting, we felt the money was virtually going down the drain every month.
We wanted to invest it instead.”
The couple are not alone in their conviction that now could be the time to
make their entrance into the housing market. According to the latest figures
from Halifax, prices fell by 17.2% in the year to January to an average of
£163,966, leaving them back at levels last seen in July 2005 and 18% off
their peak.
Although most economists and analysts believe the market probably still has
further to go, this does not seem to be deterring househunters. In a further
incentive to buy, meanwhile, the Halifax recently reported that the house
price to earnings ratio, a key affordability measure, is at its lowest for
5½ years. So, if 2008 was the year of the renter, will 2009 turn out to be
the year of the first-time buyer?
After years of watching prices spiral, destroying their hopes of getting on
the property ladder, would-be first-time buyers are beginning to size up the
market: singletons who believe 2009 may be their only chance to buy; couples
who realise that together they could get that extra bedroom, garden or
garage; and parents of the above who see bricks and mortar as a safer
investment than a savings account and a way to help their children – a
win-win situation.
The National Association of Estate Agents estimates the number of first-time
buyers as a proportion of people registering more than doubled in the first
two weeks of January to 25%, up from 10.8% in December and 14.5% in January
2008. Admittedly, this is considerably lower – both as a proportion and in
absolute terms – than during the boom years, yet the direction still appears
upward.
“We’re seeing a lot of first-time buyers,” says Kevin Hollinrake, a director
at the York branch of Hunters Property Group. “Most of them are
professionals in their thirties who have been saving up for a while, but who
have been excluded from the market until now.”
Mark Valentine, sales manager at the Battersea branch of Bushells, has
witnessed a similar phenomenon in his part of southwest London. “We’ve had
eight sales already this year,” he says. “A lot of them are looking for
two-bed properties, so they can then rent out the second bedroom.”
There is one serious problem, though, which threatens to thwart the
property-buying aspirations of many prospective first-time buyers: the
continuing difficulty of obtaining mortgage finance. Although a few lenders
are still prepared to advance as much as 90% of the value of a property, in
some cases, the rates are expensive. Anyone who wants to access the better
deals must come up with a deposit of at least 20% or even 40%, a near
impossibility for many people in their twenties or early thirties,
especially if they are still struggling to pay off student loans.
“The mortgage market has changed dramatically for first-time buyers. The
special deals available aren’t really aimed at them,” says David
Hollingworth, spokesman for brokers L&C Mortgages. “Providers aren’t
very interested in first-time buyers because they don’t tend to have as
large a deposit.”
This is borne out by data from the Council of Mortgage Lenders. It found the
average amount borrowed by those taking out their first mortgage in December
2008 was 78%, down sharply from 90% a year earlier. By contrast, in the
depths of the previous down-turn in 1992 – which, unlike the present one,
was not accompanied by a credit crunch – the average loan borrowed was 95%
of the value of the property.
To add to prospective buyers’ woes, lenders are continually revising their
range of loans, which means deals that appear to be available are suddenly
withdrawn at the crucial moment. Sophie Clayton, a vet from Devon, knows how
frustrating this can be. She had saved £24,000, a sum she hoped was more
than enough for a deposit on a two-bedroom house in Kingsbridge, but she
still faced a struggle to obtain the mortgage she needed.
“Cheltenham & Gloucester wouldn’t give one to me, despite the fact
that I had a higher deposit than the 10% they originally asked for,” says a
still-frustated Clayton, 25. “Nationwide wouldn’t give me one because of my
[low] income, even though I had a higher deposit. And Abbey wouldn’t give me
one straightaway, because they thought the property was a new-build.” It was
only when Clayton demonstrated that the house had originally gone on the
market for £210,000 and been reduced to £175,000, and that it was built in
2005 and so wasn’t a new-build that Abbey relented and gave her a mortgage,
on a three-year deal at a fixed rate of 5.85%.
Ultimately, what really helped Clayton get the house she wanted was her strong
negotiations, a tactic she would advise any first-time buyer to adopt. She
managed to get a further £17,000 knocked off the asking price, finally
paying £158,000. “It made sense to buy now that prices have come down quite
a lot,” she says. “I’ve bought it as a long-term investment to live in and
then sell on for a higher price, hopefully.”
It is the same strategy that Emily Feltham and her boyfriend, Jason Fingland,
are hoping to adopt. Indeed, they have taken it so seriously that they have
both moved back in with their respective parents in a bid to cut down on
outgoings and speed up the process of saving for a deposit.
“It’s tricky,” says Feltham, 23, a public-relations consultant. “We decidedto
buy a year ago and managed to save a 5% deposit, but the banks stopped
offering 95% mortgages just before we started applying for one in
mid-January. So now we are saving up for a 10% deposit, but are finding it
difficult because rates are so low and commuting to work in London every day
is expensive.”
The couple know what they want – a two-bedroom cottage for £150,000-£160,000
in the popular Surrey towns of Godalming or Haslemere, or close to
Guildford. They believe this year will be their best opportunity.
“I keep an eye on the market and follow certain properties, some of which have
been on for absolutely ages,” says Feltham. “It’s a good time to capitalise
on the fact that people with homes on the market need to sell and will
accept lower prices.”
