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'Action needed' to help struggling new buyers

Friday, 1 June 2007 12:00 AM

First-time buyers are increasingly priced out of the property market, with only one in ten buyers now making their first step onto the property ladder.

New figures from the National Association of Estate Agents (NAEA) show only 10.3 per cent of buyers in April were first-time property owners, down from 12.6 per cent in March and their lowest share of the property market since April 2006.

The persistent trend for buy-to-let investments has had severe consequences for the first-time buyer market, the NAEA warns, but new buyers' problems are now compounded by the threat of a further interest rate rise.

Buy-to-let investors - who tend to target the same properties favoured by first-time buyers - have caused an "acute shortage" of affordable starter homes and fuelling house price inflation, the NAEA reports.

The latest interest rate rise is now acting to constrain first-time buyers' borrowing, further impeding their efforts to get on the property ladder.

The Bank of England has now raised rates to 5.5 per cent, up from a low of 3.5 per cent in July 2003, and many commentators expect a further hike before the end of the year.

According to the NAEA, this has created "more uncertainty in an already hesitant market."

For buyers in the south and London, affordability has been restrained further by a lack of properties priced low enough to escape stamp duty.

Stewart Lilly, president at the NAEA, called on the government to "wake up" and address the lack of affordable housing before more young buyers area priced out of the property market.

Mr Lilly said: "Abolishing stamp duty for first time buyers is one quick way the government could make a difference to this struggling group.

"We have continually urged for the government to make more concerned judgements for this fragile market, who are struggling to get a foothold due to this turbulent environment in which we live.

"This latest generation should be allowed to get onto the property ladder like their parents, and their parents' parents did."

He warned: "Action is needed."

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