Rises leave new buyers out in cold

IF YOU have been waiting for a lull in the housing market, you could be waiting a long time yet.

Researchers at The Centre for Economics and Business Research (CEBR) have predicted house prices will rise by £1,000 a month throughout this year.

This trend, if continued, could see the cost of an average home in the UK rise from £187,000 to £225,000 by the end of 2010 - more than double the value of the average property in 2002.

York estate agent Kevin Hollinrake believes £1,000 a month is a fairly accurate prediction of the price rises ahead. But that isn't as bad as it sounds, he insists.

"It could be £1,000 a month, but it works out at quite a modest increase - about six per cent," said Mr Hollinrake, of Hunters estate agents.

"It sounds frightening, but six per cent growth is more or less in keeping with younger people's salary increases. The average wage increase is more like four per cent, but younger people tend to get slightly faster salary increases."

First-time buyers will continue to struggle, he predicts, mainly because of high deposits, which can be a bigger problem than monthly mortgage payments.

He believes other factors also leave many younger people struggling to get on the housing ladder.

"I've noticed over the years that when I first started out, 20 years ago, more people bought as a couple, but now more people expect to buy by themselves and I'm not sure how realistic that is. It can make it more difficult to get on the housing ladder.

"The answer is to build more houses, but politically, that seems to be impossible."

Mortgage adviser Richard Mowbray does not think prices will peak at £225,000 in 2010. The south east has seen a tremendous property boom, he says, but he would be surprised if this were replicated in York.

That said, we are in real danger of out-pricing first time buyers, he says.

That nearly happened a few years ago, he explains, with the market almost coming to a standstill because buyers at the lower end could not afford to proceed.

The buy-to-let market saved it then, he said, but there might be little point in investors buying amid higher prices.

"If first time buyers haven't got help from parents, then most people simply don't earn enough on average to afford to buy in York," said Mr Mowbray, of the Mortgage Advice Centre, in York.

"I feel the demand at the bottom of the market is coming more from investors than it is from first-time buyers. I think there is probably a limit as to how far people are prepared to go at the time in order to secure property."

First-time buyers could benefit from registering with their local authority for affordable housing, he says. There are huge queues for such schemes, but patience could pay off.

"The schemes tend to be subsidised so you can buy a property, live in it for a couple of years in which time hopefully your salary will have increased, so you can afford to sell it on and buy outright and let some other first time buyer take over your property."

Case studies

1. BUYING a house is not an option for 23-year-old Jonny Kendall.

Unless he could share the mortgage with someone else, he would not be able to manage the cost on his own.

It was a dream that seemed possible a few months ago, when his sister decided she wanted to buy a house with him.

Their plan was to buy in York and rent two rooms to friends to help with the mortgage. It fell apart when a possible tenant moved to Australia.

"My sister lives in London and wants to buy a house, but can't afford London prices," he explained.

"We wanted to buy a house together in York and rent a couple of rooms out to cover the mortgage. We've put the plans on hold for a while - we can't afford to do it without a guarantee someone would rent."

Jonny, a planning officer, had obtained a mortgage promise from Halifax, and had been looking at houses around the Clifton Green area. He had hoped to pay around £140,000 for a two or three-bedroom terrace. To afford that, he would have had to sell his car for the deposit, while his sister paid her share with work bonuses.

He had a shock when a similar property went for over £500,000. There was no way he could afford that, he says. Jonny will have to wait until his friend gets back from Australia before he looks for houses again.

He remains disappointed that he cannot afford to buy himself.

"I'm living at home at the moment, but I've been to university so I'm used to living away from home and wanted my own freedom and wanted to get on the ladder myself," he said.

"I definitely couldn't afford it if prices did rise by £1,000 a month. Although I get pay increases, they won't be the same rate as house price increases."

2. NATALYA Wilson would love to buy her own home. At 32, she has recently moved back in with her mother, for the first time since she was 18.

It is a strange situation to be in, the York journalist says, and she would like somewhere of her own.

But unless the market drastically changes, this will not be possible.

"When I was a kid, I would have thought that by the time I was 26 I would have had my own place," she said. "I think it's ridiculous that as a professional in my early 30s, I can't even think about doing that sort of thing.

"When my mum and dad were ten years younger than I am now, they already had their own property. My dad was working and my mum had a young family. There was only one wage then, so how can it be so difficult now? House prices are absolutely stupid."

Previously, Natalya rented with her boyfriend. It was slightly cheaper than buying, she said, and as they weren't in a position to buy, it was the best option.

Now she is single, she has thought about renting a flat. That is too expensive, she says, but she would not want to share a house.

If she were to buy, she would have to speak to her father and see if he would invest some of his retirement money into a house with her. Even that is something she cannot really afford.

"I know my wage won't increase enough for me to be able to afford a house at the prices they are. Unless there is a massive crash in the property market, I've absolutely no chance," she said.

What's to be done in York?

EVERYONE appears to agree there is a housing crisis in York. The question is what to do.

The problem is caused by the growing gap between incomes and house prices.

According to York MP Hugh Bayley, half of all residents in York in full-time employment earn less than £22,620 a year. In December, however, the average house price in the city was £181, 312, according to the latest figures from the Land Registry.

Even the cheapest homes in York are out of reach of many ordinary young working people.

With property prices nationally set to increase by an average of £1,000 a month, the problem will get worse, not better.

The high cost of renting a home in York does not help. Private sector rents range from an average of £515 a month for a one-bed house or flat, to £675 a month for a three-bedroom house, according to Labour councillor David Horton.

This makes it harder for young couples or young families to save up for a deposit to buy their own home.

A further problem has been the tendency for developers to build flats rather than family homes with gardens.

So what can be done?

Mr Bayley recently outlined a 12-point plan, calling for action from the Government and the local council.

His proposals included:

THE GOVERNMENT:

* To increase York's social housing grant.

* Derwenthorpe and Germany Beck to be completed as quickly as possible.

* To permit some greenfield land top be developed for housing.

* To relax rules allowing the council to spend only a quarter of its receipts from council house sales on housing investment.

* To impose restrictions on the right to buy council homes.

THE COUNCIL

* To cut the average time it takes to re-let empty council homes.

* To set up a "rent and save" scheme for single people and childless couples to rent from the council while saving for a deposit.

Council leader Steve Galloway welcomed some of Mr Bayley's proposals, such as increasing the proportion of receipts from council house sales the council would be allowed to invest in new housing.

But he said with brownfield sites such as York Central and part of Nestlé in the pipeline, there was no need to use greenfield land for housing.

That disagreement seems to be at the heart of a row that broke out between Liberal Democrat and Labour councillors last week.

Labour's David Horton accused the ruling Lib Dems of watering down his motion to increase the number of affordable homes for York to be built under the regional housing strategy.

The Lib Dems have suggested there will be a need for 640 new homes in York every year, with a proportion of those being affordable.

Coun Horton wanted to increase the York quota of new homes to 970 every year - which would have required greenfield land to be used, but would automatically have meant more affordable homes being built.

The Lib Dems effectively vetoed that.

Both parties do agree that York should be allowed to spend more of the income received from the sale of council homes on building new affordable homes.

Anne Reid, the Lib Dem executive member for planning, said the city council should also be allowed to spend some of the £27 million of council rent money that will be siphoned off by the Government over the next five years.

As The Press reported in December, council bosses claim that is how much of York council's rent money will be taken away to subsidise poorer councils.