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5 June 2008

First-time buyers will benefit from falling house prices

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by Kay Mitchell

First-time buyers will benefit from falling house prices

According to a report by Hometrack, the housing intelligence company, a 10% decline in property prices will mean a fifth of those currently priced out of the market will be able to purchase a 2 or 3 bedroom home.

28% of young people in work in the UK are unable to buy even their cheapest local properties, say Hometrack with those finding it the hardest in London, followed by those in the south-west England.

The north-east is the most affordable part of the country for homes where just 17% of young households are priced out of home ownership.

Many analysts are forecasting a drop of 10% this year and if their estimates are correct, then the proportion of young working households priced out of home ownership would drop by a fifth to 22.5%, according to Hometrack.

The report is based on an analysis of the property market by Professor Steve Wilcox of York University.

However the current lack of mortgages will still prove to be a hurdle for many prospective buyers, according to Professor Wilcox.

He explains as property prices are falling, access to the property market is being increasingly limited by the costs and more restrictive terms of a substantially reduced supply of mortgage finance.

The Professor’s analysis shows that the cost of repaying a mortgage increased by 12% in 2007, which meant in turn that the cost of paying back a home loan increased to 34.5% of average incomes for first-time buyers.

That was higher than in 1990, at the peak of the house price boom at the end of the 1980s.


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