Property market watch
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Why sun-seeking always beats house-hunting. By Rosalind Russell London must be a city of optimists. Or a lot of people are hopeless at arithmetic. Mortgage costs and the rapid price hikes of the past few years have outstripped first-time buyers' ability to pay. However, according to research by the Notting Hill Home Ownership (NHHO) housing association, 63 per cent of would-be homeowners thought it quite likely they would own a property within two or three years. As the NHHO points out, the average annual salary is £24,500, so even with savings of £10,000, most would struggle to borrow more than £120,000. Even with prices dropping, the current average house price in London is £371,000. "If home ownership is to become a reality for the majority, house prices would have to drop far more dramatically than recent figures suggest," says Mark Vaughan of the NHHO. "In fact, London's property market continues to buck the national trend, with double-digit rises reported across much of the capital in early 2008. "When the borrowing capacity of the capital's home-seeking public is set against average house prices, the financial shortfall is alarming, and proves that optimism among buyers does not connect with reality. This chasm between average savings and house prices shows no immediate signs of being bridged, meaning that for the majority of London's homeseekers full property ownership remains an unattainable goal," he says. The survey showed that 46 per cent of interviewees do not sacrifice their annual holiday to save up for a deposit, hitting the sunscreen in the belief that they will still be able to buy a property. The NHHO says that the difficulties of getting a loan have led to increased numbers considering shared ownership schemes. There is another way: private sector rentals are helping many landlords to hold their nerve and hang on to their investments. "Private renting has become far more competitive as an option compared to the cost of buying," says Steve Wilcox, professor of housing policy at the University of York and author of the UK Housing Review. Adrian Coles of the Building Societies Association says: "The private rented sector is providing good quality accommodation to increasing numbers of people. However, building societies have not forgotten first-time buyers." With rents running at about a third cheaper than mortgage costs on a comparable property, it is not surprising so many potential first-time buyers would rather hit the beach than the bank loan. |
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