Second steppers hit hardest by housing market malaise
New research suggests it's harder to move up the ladder than to get on to it in the first place.
It’s not just first-time buyers having a tough time of it at the moment – first-time sellers are also in a tricky position, with declining home affordability and falling house prices eating up equity.
Lloyds TSB has launched an annual Second Stepper report, and it makes for pretty grim reading. In fact, it even suggests that second steppers face more challenges than first-time buyers. Almost two-thirds (61%) of second steppers said they had intended to move up the ladder in the past 12 months, but had been unable to do so due to a number of challenges they faced.
The main challenges are:
Raising a new deposit
More than seven in ten second-time buyers admitted concern about the higher level of deposit required for their second property. Indeed, more than a third (36%) said they had no deposit in place, and that this was the main problem they faced in climbing the ladder.
The average deposit for a typical second stepper in 2011 was £60,670, more than double the amount needed in 2011 (£24,783).
Falling equity
Almost one in five second steppers do not have enough equity in their current property to move. This jumps to 26% in Scotland. According to Lloyds, the typical second stepper is in negative equity to the tune of almost £10,000.
If you're in negative equity, check out this video for tips on how to get out again.
Rising cost of moving
Half of second steppers highlighted the fees and charges associated with moving home as one of the main challenges they faced in moving up the ladder. This is a particular problem in the south of England, where it was cited by almost two thirds of second steppers (63%).
The average cost of moving home in 2011 jumped to £8,922, compared to £3,632 in 2001.
There are ways to save money though, as we highlighted in How to cut the cost of moving home.
Affordability
Home affordability is at its least favourable level in more than 25 years, and is now less favourable for first-time sellers than for first-time buyers.
Lloyds calculates affordability as the the average price of a second stepper home (minus the equity) compared to average earnings. So for second steppers, the affordability ratio is currently 5.2 times gross annual average earnings. Compare that to just 4.1 times for first-time buyers.
What’s the answer? Should the Government and lenders take steps to help second steppers move up the ladder? Or is this just part of the house price correction? Let us know what you think in the comment box below.
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This will be further exacerbated by the governments "new buy" schemes. I believe there are far too many first time buyer properties being built, especially in my area. Numerous planning applications for 1&2 bed flats, with so many already on the market. A policy is needed to encourage first time buyers to buy properties from first time sellers, to unlock the current issues with trying to upsize. We need to ensure buyers can move up the housing ladder, not create a ditch whereby first time buyers sit and are never able to progress onto and up the ladder! Perhaps an incentive, in the form of tax break or govrnment intervention, could be a realistic proposition. Problem is, this wouldn't make the construction companies very happy as it would shift the demand to existing property (or should), therefore doubtful the govrnment are interested in such sensible, longer-term improvements.
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In order to move up from a "first time buyer's" house, you have to find a first time buyer to buy it. So either the problem is that the market is too expensive for first time buyers, in which case they are the problem which the article says they aren't, or there are too many first time buyer houses being built, in which case the market is at fault. No, that can't be right either, we all know the free market is perfect. I think I'll go and do something constructive....
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@yocoxy - I think nickpike may well be correct about house prices. Although I'm not sure what "worth" means other than the amount people are prepared to pay for something, there is a relationship between house prices and incomes. Currently prices are way in excess of the average ratio so unless the world has fundamentally changed in some way we can expect a correction. Given that mortgage rates are at historically low levels they are likely to increase and that will exert a downward pressure on prices, if not a complete collapse. If you do think house prices are likely to fall the best advice is to rent or to buy as cheap a property as you can stand to live in and put money aside so you can scoot up the ladder when you get the chance. I'm a little more baffled by his constant refrain that the Labour Party is to blame for everything. I'm not clear how Labour, or indeed the coalition, have encouraged people to "live by debt". As far as I can see that's (i) more down to the banks than to any government (ii) pretty much how capitalism works anyway. I guess we could theoretically move to the economic model advocated by Islamic fundamentalists where lending money at interest would be forbidden, but the cure might prove worse than the disease.
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24 March 2012