HOW TO GET ONTO THE PROPERTY LADDER: HELP FOR FIRST TIME BUYERS
According to the most recent report by the Land Registry, the average house price in the northwest stood at £135, 062 in April 2007. Couple this figure with rising interest rates, increasing rents and a much slower rise in average annual salaries, and it is no wonder that the number of first time buyers dropped by eight percent last year. But before you panic, consider our advice for how first time buyers can increase their purchasing power.
1. Mortgage Mates
In the last decade, the property market has seen a huge rise in the number of 'mortgage mates': people who decide to co-buy with someone entirely unrelated to them. Websites such as SharedSpaces.co.uk function along the same lines as dating websites, where users post a profile and search for other people with the same property aspirations. The popularity of such sites (SharedSpaces alone boasts thousands of users) has led to an increase of mortgage lenders prepared to offer preferential rates to people buying together.
The benefits are obvious. You can keep your friends and finances separate, but still effectively double your purchasing power. You are also investing rather than lining the pockets of a landlord. However, there is the possibility of things going wrong so it is imperative that you have a legal Deed of Trust drawn up, setting out the rights and responsibilities of all parties, how major costs will be split and what will happen at the end of the partnership.
2. English Partnerships
English Partnerships is the national regeneration agency working with the government to deliver the First Time Buyers' Initiative.
The concept is simple. You contribute as much of the market value of a home as you can afford (at least fifty percent) and English Partnerships will make up the difference, retaining a right to a proportionate share in future sale proceeds. After three years, you start to make payments to English Partnerships based on the remaining entitlement. You can increase the percentage of the house they own at any time by making payments of at least ten percent of the market value, and this reduces both English Partnership's monthly fee and their percentage of money made in the sale of the house.
There are various schemes in operation around Manchester, including Urban Splash's Chimney Pot Park development in Langley and CrosbyLendlease's Vallea Court development. But be warned: the schemes tend to be heavily oversubscribed, waiting lists are long and both eligibility criteria and conditions placed on participators are strict. In the northwest, current priorities rest with key workers and existing owners affected by clearance.
3. Do Your Research.
There are still opportunities to buy properties at low prices, though they can be few and far between. Buyers looking for a new-build apartment will benefit from pledges certain developers have made to make a percentage of their new properties affordable to first time buyers. For example, over the May bank holiday weekend LPC Living launched the sale of apartments in their Freshfields development in North Manchester - half of which were priced under the £100,000 mark. The Albert Park View development by Godliman-Watson, situated in the Broughton area of Salford, has two-bed apartments starting at £125,000 and will also pay your stamp duty and contribute towards your legal fees. Other developers may also have deals where 5% of the deposit is paid. Online bulletins are a good way of finding out about affordable new developments about to enter the market.
Buyers searching for a home in the "established" housing market will find that a degree of flexibility on location can save them thousands of pounds. Less sought-after areas of Manchester will have properties at far more affordable prices than their trendier counterparts. Choosing a one-bed flat in Rusholme over a similar property in Chorlton could save you a cool £30,000. Websites such as FindaProperty are good places to get an overview of the average house prices in different areas of Manchester.
4. The Last Resort: Bank of Mum and Dad
Borrowing money from friends or family is a rapidly growing trend among first time buyers. According to recent research by Scottish Widows Bank, thirty-nine percent of graduates are unable to get onto the property ladder without help from their parents in funding a deposit. Whether this is through savings made through living in the parental home rent-free while saving for the deposit or in the form of a loan, the Bank of Mum and Dad are often the last hope of first time buyers priced out of the market.
You may well find it beneficial to ask your parents to lend you money now which they are planning to leave you in a will, as it will go further towards buying a house now than in forty or fifty years' time. Alternatively, if they own their own home they might be willing to free up the equity they have made during the housing boom to put a deposit on your house.