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Commenting on tomorrow's Halifax report on first time buyers, RICS chief economist, Simon Rubinsohn said:

"While first time buyers continue to struggle to access the housing market, the conditions should start to gradually thaw throughout 2008. However many are still struggling to raise the upfront costs of purchasing a property as banks remain reluctant to accept lower deposits. Those on lower quartile income would have to save almost 100 percent of their take home pay to have a chance of raising a deposit for the average priced house.

"However, there is huge pent up demand from first time buyers and should house prices drop in the early part of the year, many will be ready to pounce, especially if more repossessions filter through into the market."

Analysis conducted by the RICS shows that what may termed 'accessability' is more relevant than 'affordability'.

By this, we mean the up-front costs of purchasing a property are proving a greater obstacle for FTB's than the on-going costs.

We note that FTB's have been having to find larger deposits in recent years in part because lenders have been reluctant to advance high loan to value ratios. In 1989, the average FTB loan to value ratio was 95%. So far this year, it has averaged 90% according to CML.

Another big issue for FTB's is stamp duty. A decade ago, relatively few first time purchases would have had to find the additional finance to pay this tax. Now roughly two-thirds do.

There is huge pent up demand to buy from FTB's who have been squeezed out of the property market. The prospect of lower interest rates in 2008 will provide some relief for FTB's but the benefit will largely be felt in the on-going running costs rather than the up-front costs.

This points to a gradual improvement in the picture for FTB's over the next twelve months rather than anything more dramatic.

by: Editor

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