A generation may never afford to buy their own home

Jeremy Gates rounds up the latest news from the world of property and analyses why the next generation might never own a home

Although looser lending conditions in November produced a marked increase in loans to buyers with smaller deposits, a housing market commentator fears that many buyers could still be acquiring a depreciating asset if the market gets more difficult.

The mortgage monitor from e.surv Chartered Surveyors says purchase approvals for homes below £125,000 - typical first-time buyer and buy-to-let properties - hit nearly 12,800 in November, against 11,904 in October.

The Average deposit on typical first-time homes fell to 31%, the lowest since August 2008, and down from 33% in October.

E.surv director Richard Sexton says: "For the last few months, banks have focussed their lending on specific groups, but this is the first time they appear to have increased lending to first-time buyers in any notable sort of volume."

With Government-backed plans to get more people into owner occupation with smaller (5%) deposits, and figures from lenders appearing to show house prices have stabilised, more first-time buyers may be tempted to buy early in 2012.

But housing market commentator Henry Pryor warns: "The short-term direction of house prices in most areas must be downward. Even if you manage to buy with a subsidised mortgage, you may become the owner of something which is getting cheaper."

Crunching the latest Land Registry figures, Pryor calculates that outside London, average actual selling prices in many areas have fallen sharply between January 2008 and October 2011.

He says: "With average asking prices across England and Wales trending less than 1% below their 2008 peak, it seems many agents and sellers have yet to grasp the fact that sale prices in most places are sliding - down, on average, around 12% below the peak of that same year.

"The curious aspect in the present situation is that asking prices are continuing to rise, albeit very slightly, while selling prices recorded at the Land Registry are falling.

"In Newcastle-upon-Tyne, for instance, asking prices rose in the last year by 5.2% to £193,613, but prices achieved fell 4.7% to £118,997.

"In Birmingham, asking prices advanced 0.5% to average £149,503, while selling price recorded by Land Registry fell 7.5% to £115,876."

Pryor maintains: "Few people, so far, have been forced to sell, partly because interest rates were cut drastically to rock bottom to help overstretched borrowers.

"Given likely job losses in private and public sectors over the next two years, however, many more could be forced to sell from 2012, and presumably must take a price the market will pay.

"We are starting to see some striking predictions for house prices in 2012. Most are bearish and it is quite likely that recent pain - 10% falls last year in Hartlepool, for example, will be seen elsewhere."

He adds: "We may be looking at an entire generation unable to buy its own home. I am thinking of people currently aged 25 to 35, earning pretty close to the average national wage of £25,670.

"In past times, these were the sort of people who bought as soon as possible, particularly if two salaries were coming in.

"Today, many of this group could be into their mid to late forties before rising prices makes home ownership attractive again.

"By then, it might be too late to arrange a mortgage.

"The only consolation in the present situation is that younger people are more relaxed about renting than many couples would have been a generation ago, in the 1970s and 1980s, when Margaret Thatcher persuaded everybody it was vital to buy as soon as they possibly could."

The problems of buying a first home are underlined by an analysis from new saving and investing website InvestorBee.

Based on data which analyses saving habits from more than one million adults in the UK, the survey found it would currently take the average Londoner just over 19 years to save for a house deposit in the capital.

The average Londoner, says InvestorBee, earns £45,758 and puts aside around 9.6% (£4,379) of their salary each year.

With the average house price in Greater London currently at £429,912, the minimum time to save a 20% deposit would be 19.6 years, the research claims.

The website believes it is easiest to save for a deposit in the North (10.4 years) and East Anglia (11.9 years).

Pryor adds: "Lenders are keen to be seen to be relaxing the purse strings, but the lack of access to reasonable credit remains a critical brake on the housing market.

"Most lenders still ask borrowers to put down around 25%, which for many first-time buyers can represent around £35,000, saved out of taxed income.

"With the average UK salary around £28,000, this is a formidable target. Meanwhile, renting becomes harder as the supply of homes to let is tight while demand increases."