DEBATE: Will a fall in house prices be good for young people?
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House prices are predicted to fall by five per cent this year (via Getty Images)
Will a fall in house prices be good for young people?
Matthew Addison, chief executive at StepLadder, says YES.
Given that we still arenít building enough homes to satisfy demand as a nation, it is incredibly important for this finite supply to be allocated in a way that works equitably.
This hasnít been the experience of most prospective first-time buyers, with the combination of stringent mortgage affordability criteria and runaway housing costs snatching away the first rung of the property ladder.
A drop in prices will represent a much needed correction in an imbalanced market, which is currently tilted in the favour of existing property owners who are able to use their existing wealth to buy more buy-to-let properties ó depriving first-time buyers of suitable homes and turning them into Generation Rent.
Adding insult to injury, rising costs for buy-to-let landlords get passed on to tenants, meaning that for many, the cost of renting is substantially worse compared to what their mortgage would be for their own home.
Though it may not last long, with lenders constantly adjusting their mortgage availability, a fall in prices now will undoubtedly help more first-time buyers achieve their dreams of homeownership.
Read more: UK house prices to fall five per cent this year
Mick Silver, chief executive at Moovshack, says NO.
While on the face of it a five per cent drop in house prices seems great for first-time buyers, it isnít. Drops in house prices mean that the market is nervous and unpredictable, which causes mortgage providers to become nervous too and demand bigger deposits.
Housebuilders are also less likely to build affordable homes in a declining property market, meaning fewer homes available to first-time buyers.
Deposits are already a huge challenge, and where young people may previously have been able to buy with a five to 10 per cent deposit, they will now need 20 per cent or more to secure their home, making getting onto the property ladder even harder.
Price drops undermine confidence, so if the market falls further, first-time buyers also risk entering negative equity.
Owning a home is ultimately the best way to acquire capital, so itís in first time buyersí (and everyoneís) interest that the market remains stable.
Read more: Builders urge government to target 30,000 new houses for elderly a year in pandemic recovery
Main image credit: Getty
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