Rightmove’s latest buyers’ survey finds that two in five (40%) second-steppers are concerned that their home is too small for their family, and a further 7% have even put off having children because their property simply isn’t big enough.
With the average age of prospective first-time buyers and second-time buyers standing at 30 and 41 respectively, late entry onto the housing ladder and longer stays on its bottom rung mean second-steppers, although active, are increasingly becoming the property market’s ‘squeezed middle’, weighed down by worries over space, age and kids.
Miles Shipside, director and housing market analyst at Rightmove comments:
“Many second- steppers have had to shelve their family planning and home-moving ambitions since the onset of the credit-crunch over five years ago. Typical first-time buyer properties such as flats and smaller houses serve a purpose in getting a foot on the housing ladder, but don’t tend to be suitable family homes in the long term. This next step up the ladder is proving a difficult one for many to make. Second-steppers are the ugly ducklings of the housing market; overlooked for many government incentives, struggling to protect their equity if they bought near the peak, and now crammed into a home too small for their growing family needs.”
Rightmove’s survey finds that 29% of those who intend to buy in 2013 will be second-time buyers. This is up 3% on last quarter and indicates that second-steppers are active and make up a sizeable proportion of potential buyers. However, with the average age of those purchasing for the second time now in their forties, and ongoing concerns over having enough room to house or even start a family, Rightmove’s research indicates that all is not well for this key housing market group.
Just under half of the major issues voiced by second-steppers were family-related, with ‘my current home is too small for my family’ representing the major concern for 40% of respondents. In addition, 7% stated ‘I have put off starting a family because by current home is too small’. The average age of those intending to buy for the first time in 2013 is 30, and 41 for those purchasing for the second time. This indicates that as well as first-time buyers purchasing later in life, the traditional trading-up timescale of a move every five-to-seven years is a lot longer at the foot of the housing ladder. This creates less scope for young families to progress to suitable family homes.
Shipside observes:
“Not only are first-time buyers getting their foot on the housing ladder later in life, but there seems to be a widening gap between the ladder’s bottom two rungs. This space-age- kids dilemma highlights the lifecycle pressures that many young families are now under.”
11% of second-steppers state they are selling to trade-up despite the fact that the current value of their property is less than they paid for it, highlighting their urgency to relocate to a larger home in order to accommodate their family.
Shipside adds:
“Diminished equity will seriously affect a second-stepper’s ability to raise a deposit that will attract the most competitive mortgage rates, and may even necessitate a second visit to the ‘Bank of Mum and Dad’ in order to move.”
In addition, the main pipeline supply of first-time buyers – the target audience to sell to for those ‘second-steppers’ selling to trade up – is at its lowest proportion since 2010 at 22%. Six out of ten regions are set to be first-time buyer ‘blackspots’ in 2013, so called because the proportion of buyers who are intending to purchase for the first time is below 20%. This is less than half of the 40% levels associated with a healthy and functioning housing market and is a challenge to those second-steppers looking to sell, as they see their main target of likely buyers shrinking.
Shipside adds:
“The struggles of first-time buyers also continue, with the proportions in six out of eleven regions being in ‘blackspot’ territory. It is usual to see different speeds of recovery in different sectors of the market after a downturn and the hardest hit groups are often at the foot of the housing ladder. However, should transaction levels pick up this year, as the Funding for Lending Scheme fuels a more competitive lending market, then we’d hope to see an increase in those getting onto the first rung of the housing ladder. This in turn would be a major boost to those second-steppers who urgently need to trade-up.”
Ben Thompson, MD Legal & General Mortgage Club, reveals this thoughts on the issues facing second steppers at the moment:
"It has been obvious for quite some time that second steppers are stuck. Well over half don't want to remain where they are, often because they have outgrown their current home.
One of the biggest barriers to moving home is not being able to raise a deposit. Although this challenge won't disappear any time soon, as house prices increase it will eventually become easier. The good news is that there are already grassroots signs that lending criteria is beginning to relax a little.
"For most second steppers, it is not just the deposit that is the problem. The level of stamp duty required to make that next move is near impossible to save; especially as household disposable income has suffered a hard squeeze over recent years.
"Stamp duty went largely unnoticed for many throughout the noughties, as it was paid from rising equity. As house prices have reduced, this is no longer the case. The sharp rises we saw in stamp duty over 10 years ago are now directly causing the market to freeze.
Our hope is that in the budget some very serious consideration is given to this tax as there are many negative social and domestic outcomes caused by families being stuck. By not moving on, second steppers significantly reduce the choice of houses for enthusiastic first time buyers. This keeps prices high, kills off any recent recovery in demand, and means the market is not moving as freely as it should be.
"The Government should pay very close attention to the findings of the Lloyds TSB Second Steppers report if it wants economic growth triggered by a newly vibrant and mobile housing market. If they don't, we will be stuck for quite some time to come, and this will have wider negative implications upon families and communities, house prices, and ultimately the economy."
