First time buyers Guide

High prices delay homebuyers

by Sarah Modlock

In the current property market, it can be very hard to know when to make a move. Interest rates may have remained relatively steady but the unpredictability of house prices has caused many potential buyers to delay.

One in five people admit that they play the waiting game because they feel houses are overpriced. However, nearly three quarters say that prices increased whilst they have waited according to a survey by Alliance and Leicester. While homebuyers pondered their decision their chosen property rose an average of £33,689 over an average wait of three years and ten months. In some cases, the value of the property they had their eye on went up by over £50,000.

In fact, the longer you wait, the more you could lose out. The average house price five years ago stood at £101,550 compared with £189,852 now – an 87% increase. Unsurprisingly, most people - more than three quarters of those questioned - think that properties are overpriced.

'Some homebuyers are playing the waiting game to see if house prices will fall, says A&L's Stephen Leonard. 'It remains to be seen whether waiting will pay off going forward. Delaying tactics signify that homebuyers are being cautious about the property market and are considering their choices carefully before leaping in. There are various ways that homebuyers can get a foot on the ladder, part of that decision is choosing their mortgage deal carefully,' Leonard adds.

Then there are those who still bought a property, rather than waiting, despite their belief that the housing market was overpriced. A third said the main reason they didn't wait was because they needed to move and had no choice but to buy. The research shows that a third of potential buyers think house prices will fall soon but 55% say that's not likely.

Duncan Pownall, mortgage development manager at Bradford & Bingley, looks forward: 'There is still a wide range of opinion on the prospects for interest rates but we believe it is likely that base rate will remain on hold for the rest of the year unless there is very firm evidence of further weakening in the economy,' he says. Reports by RICs and the CML demonstrate that there has been a marginal uplift in activity and confidence, with lending for house purchase up 6% in August to £12.5bn.

Pownall continues: 'Recent data suggests that property prices are continuing to stabilise - Halifax reports annual growth at 2.5% and Nationwide's growth rate for the twelve months to the end of September is 1.8%. Halifax also reports that the gap between earnings growth and house price inflation has narrowed, which would signify that house price growth is slowing to a more affordable and sustainable rate. Despite this, however, first time buyers are still struggling to step onto the property ladder, with the number of first timers still hovering around the 30% mark, according to CML figures.'