Second time buyers tapping the bank of mum and dad

HAMISH_MCTAVISH

Graham_Devon wrote: »

Not often you get a story about how the increasing costs of property make it harder to trade up.

Except of course, that isn't at all what the story says.....

In fact the story says the opposite.

From the article....

Stephen Noakes, Lloyds TSB mortgage director, said: ‘Second steppers have been hardest hit by the subdued housing market, so it is unsurprising they are struggling to fund the trade up to their second home.

A survey published by Lloyds TSB in February found nearly two thirds of people trying to climb the property ladder from their first home were stuck, due to falling house prices leaving them in negative equity.

It's falling prices hitting the low end of the market hardest, and leaving the previous FTB-s in negative equity, that have made it more difficult to trade up.

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BobQ

The problem lies in the failure of the potential FTB to realise that they need to save for their first property, pay enough of their mortgage off before they trade it in for a better property.

Instead they want to buy before they have saved a deposit, while also wanting a good car and a good holiday and new furniture and white goods as well as the best electronics etc. Then they want to borrow more or even be given it by Mum and Dad to fund trading up to a better second house.

When will they learn restraint.

MacMickster

HAMISH_MCTAVISH wrote: »

Exactly right.

The value of the typical first time buyer house has fallen further than the value of typical second time buyer houses, meaning the crash has actually widened the gap between rungs.

This suggests that the prices of much of the housing stock still have some way to fall. If buyers can't afford to trade up, then who exactly is going to buy these "typical second time buyer houses"?

michaels

Yes but

Surely a market is supply and demand and if there is insufficient effective demand then prices will fall just as they have for FTB properties to the level where BTL supports demand. My impression locally is that 3+ bed properties are still above levels where rental return makes them suitable for BTL so if there is insufficient (effective) owner occupier demand then prices will need to fall.

HAMISH_MCTAVISH wrote: »

Exactly right.

2TB are caught between a rock and a hard place.

The value of the typical first time buyer house has fallen further than the value of typical second time buyer houses, meaning the crash has actually widened the gap between rungs.

Making it harder to trade up, not easier.

And of course larger mortgage deposit requirements make the situation worse.

HAMISH_MCTAVISH

MacMickster wrote: »

This suggests that the prices of much of the housing stock still have some way to fall.

Not really.

If they were going to fall any further, they would have done so by now.

It's been nearly 5 years now since the crash started, and we've been in the "bumping along the bottom" phase for the last 3 years.

As with all previous crashes, not long to go now before prices start rising and that's the only thing that will solve the problem.

HAMISH_MCTAVISH

michaels wrote: »

My impression locally is that 3+ bed properties are still above levels where rental return makes them suitable for BTL so if there is insufficient (effective) owner occupier demand then prices will need to fall.

Or rents will need to rise....;)

The biggest growth in demand for rented properties has been in houses, as more people are forced to rent for longer.

At the end of the day people in negative equity, or with very low equity, simply cannot afford to sell for the most part. The only choices they have are either to stay put, or rent out their FTB place before renting a larger one for themselves to live in.

MacMickster

HAMISH_MCTAVISH wrote: »

Not really.

If they were going to fall any further, they would have done so by now.

It's been nearly 5 years now since the crash started, and we've been in the "bumping along the bottom" phase for the last 3 years.

As with all previous crashes, not long to go now before prices start rising and that's the only thing that will solve the problem.

I don't think that house price rises are going to solve many problems, but also don't think that they are likely to happen any time soon.

What you see as bumping along the bottom, I see as clinging onto a ledge, supported by the precarious foothold of record low interest rates.

Itismehonest

michaels wrote: »

Yes but

Surely a market is supply and demand and if there is insufficient effective demand then prices will fall just as they have for FTB properties to the level where BTL supports demand. My impression locally is that 3+ bed properties are still above levels where rental return makes them suitable for BTL so if there is insufficient (effective) owner occupier demand then prices will need to fall.

True but what appears to be happening, in my area at least, is that those who have paid off mortgages & live in larger properties who would normally be thinking of downsizing are staying put rather than sell because, with pensions & savings interest hit so hard, the last remaining asset of any value is the home.

So supply is down as well as demand which is holding prices up, too.

Let's face it, it's a mess from top to bottom.

Thrugelmir

Itismehonest wrote: »

live in larger properties who would normally be thinking of downsizing are staying put rather than sell because, with pensions & savings interest hit so hard, the last remaining asset of any value is the home.

Or are they hanging on in the vain belief that prices will rise soon.

HAMISH_MCTAVISH

MacMickster wrote: »

I don't think that house price rises are going to solve many problems, but also don't think that they are likely to happen any time soon.

History tells us otherwise.

Another few years of stagnation, followed by the start of the next boom, is by far the likeliest scenario.

What you see as bumping along the bottom, I see as clinging onto a ledge, supported by the precarious foothold of record low interest rates.

The last time rates fell to record lows after a global financial crisis, they stayed low for nearly two decades.....

That foothold is nowhere near as precarious as you think it is.;)