More help is necessary to ensure next generation can get on the housing ladder
Martin Shankleman says news that most homeowners will be mortgage-free in 3 years is a dour reminder of the state of the housing market
September 24, 2012
Today’s report suggesting that most homeowners in the UK will be mortgage free within three years, is a stark reminder of the dreadful state of the housing market. It suggests a fundamental flaw in the entire sector, namely that the next generation of customers have been locked out of buying their own home.
In a healthy housing market one would expect a steady stream of first-time buyers, funded by reasonable loans, to enter the market, who would in turn allow existing home owners to sell on, and move into a bigger properties. First time buyers are the lifeblood of the housing industry, and without them, the entire market could freeze up.
The reasons why a mortgage backed property purchase is set to become a minority activity have been well rehearsed. The deposit needed to take out a loan is excessive, for most young people, without the help of an obliging parent. The typical first time buyer faces enormous uncertainty about the economic outlook, which means he or she will have to think long and hard before committing to such a huge undertaking. Real wages have been falling, while prices remain at historically high levels in many parts of the UK. Memories of the last housing crash, and the horrors of negative equity can only make wise first time buyers be very cautious about what might be in store in the market slumped.
Steps must be taken to make it possible for the young to get onto the housing ladder, for without them the market could be characterised by the comfortably- off mortgage-free home owners, landlords, and foreign investors.