House price inflation scared them away. Now prices are falling but they’re still not coming back – undermining the market and putting estate agents and builders out of business. Richard Northedge reports
Like a giant pyramid scheme, the housing market relies on first-time buyers to enable those already on the bottom rung of the ladder to sell their starter homes and climb higher. New blood is needed for the additional funds that will keep the market buoyant.
Yet this vital source of investment has all but dried up. The number of first-timers this year could be the lowest on record. In 1999, almost 600,000 people bought their first property, but then soaring prices started to make homes unaffordable and that number dropped steadily. Last year it stood at 358,000 – its lowest level since 1991.
However, with prices now falling, potential first-timers are still not taking the plunge even though properties are cheaper. On current trends, they will buy barely more than 200,000 homes this year. Indeed, the total could fall below the 198,000 sales recorded in 1974 and be the lowest since records began.