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To what extent might falling prices help first-time buyers to get on the property ladder?

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Introduction

To what extent might falling prices help ?first-time buyers to get on the property ladder?? Housing is a common asset that most people regard as their biggest financial asset and the largest make-up of their wealth; the purchase of a house is usually one of the largest investments an individual will make, and therefore lower house prices may encourage more people to consider purchasing housing, serving as a more affordable investment. On the obvious side a fall in house prices will only encourage further demand for housing. A demand & supply analysis will show that the falling prices should theoretically allow individuals who are considering buying a house but holding back due to fluctuations in prices finally take the jump onto the property ladder ? falling prices provides an incentive for individuals to make this large ...read more.

Middle

It also does not necessarily mean that first-time buyers must look to make a large investment immediately; extract two suggests that lower prices may allow considerers to think of renting property as an early ?alternative?, helping save up for a single cash deposit which would then in turn allow first-timers to climb onto the property ladder. However, as stated in extract two falling house prices does not necessarily indicate a good environment for contemplating investors to finally make the choice of investing; there are numerous other costs to consider such as the availability of mortgages, described as ?dropping to its lowest level for more than a decade?. The lack of mortgages may in fact serve as a deterrent to first-time buyers, preventing them from climbing onto the property ladder as there are numerous other costs to consider. ...read more.

Conclusion

to note that this policy will contribute to the level of confidence in the housing market, an example being lenders no longer willing to cut their interest rates following suit of the government doing so; the government is offering little support in the housing market and many are therefore not willing to take the risks. The people that will lose out from this ultimately are the first-time buyers who will be deterred from making such a large investment particularly if lenders and the government provide little confidence in this market. Therefore, while the fall in housing prices may incentivise first-time buyers to some degree overall it is likely to only have a limited effect, as many buyers will still be put off by the inability to receive mortgages as well as the other numerous financial costs involved. ...read more.

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