What's the Property Market like for First Time Buyers?

publication date: Aug 26, 2014
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

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Should First Time Buyers Buy Now?

Many of the headlines will tell you as a first time buyer you haven’t a chance of getting on the housing ladder. They will tell you the ‘average deposit’ is £60,000 and you can’t buy anything in London for less than £300,000.

However, a lot of these figures quoted are, to be honest, utter nonsense. They make great headlines and they help to sell newspapers. What they don’t help to do is make sure you are well informed about whether buying versus staying at home or renting is best for you and your circumstances.

The 2014 market is a good one for most First Time Buyers
As a first time buyer what you want is reassurance that when you buy a property the price remains the same, or better still rises. That way you spend your money and the value of what you have bought goes up in value.

Most first time buyers I talk to seem to be forgetting the principle of how you find your dream home in the UK. Many are aiming to rent as long as they can and save hard to buy their dream home in their late 20s or 30s. Aspirationally  that’s great, but it’s virtually impossible to do!

Buy your dream home by trading up 

The basic principle previous buyers have used to buy their dream home is the concept of ‘trading up’. How this works is, you buy a property for the average price first time buyers pay for a home.

According to the Council of Mortgage Lenders this is £135,000. Now take it that in London the average mortgage is around £200,000 for first time buyers (in 2014), so most other first time buyers around the rest of the UK are likely to be buying for £100,000 or less.

To make the sums easy, you buy a £100,000 home with a 5% deposit of £5,000.

The property goes up by 10% over the next 3 years.

Your property is now worth £100,000 x 10% = £110,000.

When you come to sell, you now have your £5,000 deposit back, plus the £10,000 it has increased in value ie £15,000.

If you buy your next home with a £15,000, as long as your salary is enough to cover the mortgage, you can buy a home for twice the amount: £200,000.

Your deposit of 5% will be £200,000 and you have £5,000 to put towards buying and selling costs.

How many times do you need to do this?
Few people ever buy their dream home straightaway unless they win the lottery! But by buying with a small deposit, as long as prices go up a little each year, say 3-5%, then you can buy your first home and keep trading up until you have the home of your dreams.

How did I buy my dream home?
I started on the ladder with a terraced property in Croydon. I then moved to a 3 bed house in Byfleet, but split up with my partner at the time, so ended up back buying a terraced property – albeit a three bed one in Bourne End.

Next I bought another three bed terrace in Thames Ditton and finally left there to buy a 200 year old farmhouse near Newark in Nottingham.

So for me it took several properties, partly due to lifestyle and job changes to get the property of my dreams and to afford them all, I had to buy at a bit of a discount as they needed work doing to them. That way I always took more money out than I’d put in.

Should first time buyers buy now?
The current market is a good one for first time buyers, as long as there isn’t too much competition for properties to buy which means you end up in bidding wars.

But in case you are not sure, why not use the following calculations to work it out for yourself - youd' be surprised how much rent isn't dead money anymore!

'Kate’s property calculation page'

And also use these checklists to help you work out if it’s better to rent or buy:-

All our information is brought to you by Kate Faulkner, author of Which? Property books and one of the UK's top property experts.
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