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

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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 investment, particularly as in the long term the value of housing may also increase depending on the state of the economy.  While falling prices may indicate a slump in an economy, it provides an excellent chance for people who previously may have not been able to afford a purchase to do so. It is also important to take into account that housing is also a necessity in any part of the personal life cycle, and therefore any fall in prices will create an opportunity and incentive.  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.

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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. Extract two also states that lenders have refused to drop their interest rates in line with the governmental cuts, ...

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