Fixing the property market: Beyond FTBs

Next-time buyers and downsizers are caught in the crossfire: The perfect storm of factors, including the pandemic, rising interest rates, and the cost-of-living crisis, has disrupted the housing market, making it increasingly difficult for these groups to navigate.

Next-time buyers have faced escalating property prices, coupled with stricter lending criteria, making it harder to trade up to a larger family home. The dream of homeownership has become increasingly out of reach for many, leading to a potential backlog of demand.

Downsizers have also encountered obstacles. The traditional pathway of downsizing to release equity has been hindered by factors such as stamp duty, limited housing options, and uncertainty in the wider economy. Many have found themselves locked into larger properties than they need, impacting their retirement plans and financial security.

Economic uncertainty and price volatility have all had an impact. Downsizers struggle to find suitable smaller properties due to limited supply and high demand, while next-time buyers face stiff competition and affordability issues.

Value caps or reduced rates on Stamp Duty, and enhanced lending flexibility for next-time buyers, would be welcomed.

The concept of buying a dream home as a first-time buyer has become increasingly impractical due to rate hikes and cost of living.

However, first-time buyers are generally getting older each year, and many have families by the time they enter the market. This demographic shift means that the typical starter home may not meet their needs. Additionally, a bigger, more expensive home may only be affordable if the cost can be spread over a longer period. Most lenders will offer 35 or even 40 year mortgages (generally subject to age caps). Some therefore don't want to wait, fearing that age could become a barrier to securing a mortgage later.

The government should introduce a shared ownership scheme where, instead of taking out a mortgage, the government purchases the remaining percentage after the buyer's deposit.

The buyer pays a proportionate rental amount and can purchase back the equity in increments. This allows the government to benefit from rental income while the buyer gradually increases their ownership stake. The scheme enhances affordability by lowering financial barriers, offers manageable monthly payments, and reduces repossession risks.

Buyers gain flexibility in increasing ownership as their finances improve, and the government secures a steady rental income. This approach stabilises the housing market, supports buyers who may otherwise be excluded from it, and encourages saving and long-term planning for buyers. Ultimately, it balances government and buyer interests, promoting a healthier, more inclusive housing market.