The low numbers of first time buyers in the current market is ‘cause for concern’, according to Nationwide. Concerns have been raised as the building society report there were only 20,000 first time buyers per month in recent years, compared to 32,000 per month before the economic crisis.
A survey by LSL Property Services found that this decline may be because of the so-called ‘rent trap.’ It reports 89% of tenants wish to purchase a property, but only 14% believe they will do so in 2013. A third of those surveyed said they will be able to afford a home within five years, and a fifth does not think they will ever be able to afford a property of their own.
Moreover, due to the lack of available credit to many would-be first time buyers, some have to demonstrate at least a 20% deposit to secure a loan, compared to a 10% deposit before the credit crisis. This is partly because the average purchase price of a first time buyer’s home is 5.4 times the average earnings, compared to 4.4 time the average earnings in 2007.
However, Robert Gardner, chief economist at Nationwide, says that there are signs of a positive future. With lower interest rates and increases in pay, there may be a rise in purchases among first time buyers. But, he warns this growth is ‘likely to be gradual’, and dependant on ‘the performance of the wider economy.’