Housing market confidence slumps in wake of Omicron

Property Reporter
16th December 2021
For sale 408

During the last year, house prices have risen by around 10% and almost half (45%) think that they will continue to rise, with just 13% expecting a fall.

Although mortgage rates are at historically low levels, making affordability easier on one hand, rising house prices are making raising a deposit increasingly difficult, and it is not surprising that this remains the biggest hurdle for first-time buyers.

This may be one of the reasons for a drop in confidence in the housing market. Just 21% believe now is a good time to buy a property, down from 26% three months ago. 30% do not think that now is a good time to buy. It’s likely that this decline in sentiment is a result of a number of factors including the end of the Stamp Duty holiday in September, the lack of properties on the market and the emergence of the new Omicron variant of Covid-19.

Despite the difficulty of raising a deposit, new research from the Building Societies Association has revealed that 53% think older family members should offer financial assistance to help their­ children or grandchildren buy their first home if they can, compared to just 28% who don’t think they should.

However, 58% of would-be first-time buyers do not expect any financial assistance from their older relatives, whilst 71% of parents expect to provide some financial help to the younger generation.

49% of parents said they expect to leave a bequest when they die to the younger family members, but less than one in three first-time buyers (29%) are expecting it. There’s also a mismatch in expectations on giving and receiving a monetary gift towards buying a home, with 41% of parents expecting to do this, but only 24% of first-time buyers expecting it.

The findings also show that parents under the age of 60 are less inclined to provide financial support to younger members of their family compared to parents aged over 60. This is likely to be due to the higher value of assets held by older generations.

Whilst the high level of support on offer from older members of the family will be welcome news for first-time buyers, it cannot necessarily be relied on. The older generation has more cash savings, investments and property equity than the younger generations, but much of this is likely to be left as inheritance, only accessible at a future date. It may also be the case that some of their wealth will be spent on social care, reducing the value of the legacy they eventually pass on.

It is not surprising therefore that 68% of first-time buyers say they will be using their own accumulated savings to fund their deposit.

Paul Broadhead, Head of Mortgage and Housing Policy at the BSA, said: “With house prices rising considerably more than inflation and wage growth, it’s not surprising that first-time buyers find raising a deposit the most difficult aspect of getting on the property ladder and something it is hard to keep pace with. But it’s clear that many families are more willing to share their wealth and give financial help than the younger generation appreciate.

“Perhaps families should use the festive period to talk candidly to each other about their future plans and aspirations and how best to use their inter-generational wealth. It could be the best present under the tree for all!”

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