We are made to believe that once “on the property ladder” the sky’s the limit. But the truth is that once you're on the bottom rung, it's more likely you'll keep banging you head on the next one up, which keeps moving further and further out of reach.
There’s even a term for it: Second Steppers. It’s a polite expression for “First Time Buyers stuck in properties they cannot move from”. Yes, their homes may be worth more in cash terms than when they bought them, but the price of their next one has soared by a far greater amount.
A survey today from Lloyds Bank found that Second Steppers in London will need to find over £330,000 on top of whatever profit they make on their first home to fund a move to their preferred second home. And across the country, the study shows that first-time buyers who are moving on still have to find an extra £128,390 in order to plug the gap. This is the worst possible news for people who struggled to get onto the ladder, having exhausted the Bank of Mum and Dad, borrowed their annual salaries several times over, and in many cases put their social lives on hold to keep up mortgage repayments on static incomes.
Even though they're probably in their 30s, any prospect of starting a family, for which an extra bedroom is pretty much essential, is crushed by reality. And there is no-one to complain to, as all sympathy is directed at First Time Buyers and those “forced” into renting who dream – however foolishly – of becoming FTBs.
The fixation with “getting on the ladder” made the Conservatives pledge to build at least 100,000 more starter homes to be sold to FTBs for “less than market prices”. This will harm Second Steppers massively, as their potential market will be attracted to cheaper options. It won’t do the FTBs any favours, as they will have less equity and worse borrowing potential when they become Second Steppers themselves.
To make matter worse, new homes, which the Government is mainly subsidising, have a poor reputation. According to a YouGov survey only one in five buyers would choose to buy a newly built home, because of low build quality which was mentioned by 38 per cent. One can only imagine what the quality of those government-sponsored starter homes might be. And yet tomorrow’s FTBs will be effectively forced to buy them.
Last year saw the highest number of first-time buyers enter the market in seven years. This is potential boost to the market, but not unless they are able and willing to buy from Second Steppers, which would exclude them from most of the government’s incentives.
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