Pent up buyer demand could erupt into a short-term housing boom, according to CB Richard Ellis.
The property firm claims that less than 200,000 first-time buyer mortgages have been granted in the past three years, less than 50% of the long-term average of nearly 500,000. The continued mortgage famine has resulted in the proportion of cash purchasers increasing from a long-term average of around 25% to around 35%.
Jennet Siebrits, head of residential research at CB Richard Ellis, says:“Affordability pressures have led to a gradual decline over the past decade in both the proportion and overall number of first-time buyers, but this decrease is accelerating. Mortgage credit remains the most significant challenge for the housing market with first-time buyers disproportionally affected by the lack of finance.
“Lenders are now demanding deposits of at least 20% and as a result, the deposit needed can be in the region of £30,000 – higher than the annual average earnings of £25,000. Buyers who can raise deposits, largely through the ‘Bank of Mum and Dad’, may still struggle to obtain a mortgage as first-time buyers are viewed as particularly risky."
She adds: “This pool of pent up demand is potentially a ticking time bomb. If credit constraints suddenly loosen, demand could rapidly erupt and threaten to destabalise the market by creating yet another short-term boom scenario.”The situation is expected to worsen still, with this figure to double by 2015 if thecurrent housing market trends continues.
