Lloyds TSB has launched its annual ‘Second Stepper’ report which tracks the ongoing plight of first time sellers amid a challenging housing market.
The report show that home affordability for ‘second steppers’ has become much less favourable and declining house prices have led to equity shortfalls for many.
‘Second steppers’ are homeowners looking to sell their first home and move up the ladder. Many potential ‘second steppers’ in today’s market would have bought close to the peak of the market and are now finding it increasingly difficult to get off the ‘first rung’, Lloyds TSB says.
According to the report, 61% of ‘second steppers’ have wanted to climb up the ladder in the past 12 months but have been unable to do so as they face an increasing number of challenges. 22% believe it is now harder to move up the ladder than get on it in the first place, with 43% also feeling it will be as equally difficult.
Meanwhile, 34% believe it is going to be harder to sell their property this year than last, with 53% predicting that the housing market will not improve this year.
A lack of affordable property to buy (35%) and a lack of offers from potential first-time buyers (32%), were cited as key barriers delaying the sale of people’s current property on top of a whole host of other challenges.
Raising a new deposit – the majority (71%) of second-time buyers are concerned about the higher levels of deposit needed for their second property often because of a lack of equity, with 36% admitting that the lack of any deposit is the main problem they face in climbing up the ladder. The average deposit for a typical ‘second stepper’ in 2011 was £60,670 more than double the average deposit required in 2001 (£24,783).
Decline in the level of equity – the average house price paid by a first-time buyer has reduced by £32,815 since the typical ‘second stepper’ bought their first home, meaning 18% of ‘second steppers’ do not have enough equity in their current property to move. In Scotland 26% of ‘second steppers’ are in this position. Lloyds TSB has estimated that the typical ‘second stepper’ will be in a negative equity position of almost £10,000 (£9,902).
The cost of moving rises substantially – general fees and charges associated with moving home (49%) was cited as one of the main challenges, especially amongst those living in the South of England (63%). The cost of moving house for a home mover stood at an average of £8,922 in 2011 – an increase of 69% (£3,632) compared to 2001. This is the highest cost since the peak of the housing market and more than three times higher than for first time buyers (£3,334).
Decline in affordability – home affordability for first time sellers is at its least favourable level for over 25 years and is now less favourable than for those entering the housing market for the first time. The Lloyds TSB housing affordability measure – calculated as the average price of a typical ‘second stepper’ home3, less their current equity position as a ratio of average earnings – stood at 5.2 times gross annual average earnings in October 2011 the highest ratio since records began in 1987.
Stephen Noakes, mortgage director, Lloyds TSB said: “First time sellers are now faced with some very tough challenges when trying to make their next move on the property ladder and many are finding it more difficult than getting on the ladder in the first place. It is vital that this group of home movers receive more support and attention as they play an intrinsic role in getting the housing market moving again.