But I also appreciate the fundamental importance of a steady stream of first-time buyers for the market. Those who are prepared to save for deposits and can comfortably meet their repayments should be encouraged.
It’s about balance and an absence of first-time buyers is as detrimental to the health of the housing sector as a lack of buy-to-let investors and home movers.
But the situation facing first-timers is more worrying than ever. Over recent weeks we’ve seen a flurry of lenders scrapping their high LTV deals. Although necessary, the move presents yet another hurdle for those attempting to get on the property ladder.
Many of these individuals will have deposits, but their savings are often wiped out by associated costs. Mortgage and solicitor fees contribute to them, but by far the biggest drain is Stamp Duty.
Research from Halifax shows that in 2007 the average first-time buyer paid around £175,000 for a property, so they were hit by Stamp Duty. And last year’s figures from Revenue & Customs reveal that total Stamp Duty revenue rose by 40% in 2006/07 to a record £6.4bn. So this tax is an obvious contributor to the government’s coffers and with the reduced availability of high LTV loans, perhaps now is the time for it to reconsider Stamp Duty’s £125,000 threshold.
At 300,000, the number of first-time buyers estimated to have entered the market in 2007 was 15,000 fewer than in 2006 and the lowest level seen since 1980.
Although the Council of Mortgage Lenders claims that subdued house price inflation and lower mortgage rates should ease affordability constraints this year, there’s a danger that the hurdles in place could discourage young people from aspiring to home ownership at all.
With personal debt levels spiralling out of control, the absence of an incentive to save could have dire consequences for the country.
The younger generation is faced with unbridled consumerism on a daily basis and the news that celebrities such as Jordan are now launching their own branded credit cards is an unwelcome sign of the ‘have now, pay later’ generation.
If home ownership gets too far out of reach for too many, spending to fuel a copycat celebrity lifestyle could eclipse the desire for home ownership. A severely contracted housing market could be the result, with terrible consequences for the economy.