The Lost Generation

I had an interesting discussion with someone who was talking about his niece who is currently renting a one bedroom flat in Dundee and paying close to £500 a month for the unfurnished flat in a not so salubrious part of town.

The value of the property is around £50,000 and if she had been able to buy it, her mortgage payments would be considerably less than the rent she is currently paying.  He said that she can’t see how she will ever be able to step onto the property ladder as the amount she is paying in rent prevents her from saving for the required deposit to make the move – even though she knows that a mortgage would be considerably less than her monthly rental cost.

In discussion with another person we were mulling over the fact that there is now a generation being bombarded with negative headlines regarding falling property prices and are therefore not so inclined to buy a property.  As I have mentioned in previous blogs first time buyers are the life blood of any housing market and, even now, the housing market is still the bedrock of the UK consumer economy.

For the housing market to be free flowing the number of first time buyers needs to be over 40% and my latest indicators show that this figure is less than 15% (although I have yet to have this officially confirmed).  Without first time buyers joining the market at the start of the housing chain there is no free flowing equity which can be used by buyers further up the chain to fund their deposits to enable them to buy higher value properties and so on.   There is also not the replacement of capital that drops off at the other end either when people sell up because of death or other reasons.  Both UK and Scottish Governments need to take urgent action to assist the first time buyer.  Readers of previous blogs will know my first time buyer proposals which will have minimal cost and could be funded by the introduction of some form of first time buyer payment – very similar to the old mortgage indemnity guarantee premium.  The first time buyer has to find a deposit of 5%, the government will guarantee a further 5% and the lender will lend 95% in reality risking only 90%.  In one simply move there could be an injection of activity into the housing market that would benefit the whole economy.

I will continue to campaign on behalf of the first time buyers.

Lindsay Darroch
Partner and Head of Property

P.S. Interested to see a recent report by Connells Surveyors indicating that their records show an increase in October in the number of first time buyers entering the market – Green shoots?

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