Buying conditions better for second steppers in UK but they don’t think it is

While property market conditions have significantly improved in the UK over the past six years, buyers and sellers face fresh frustrations and lack of confidence in moving to the next step, new research has found.

Second Steppers, mostly couples and young families moving on from their first time buyer home, think it will be harder to sell their property this year, partly due to concerns about the economy, according to the research from Lloyds Bank.

Many had previously found themselves stuck in their starter home with little or no equity as the economic downturn took hold but the latest figures show that conditions for this group have actually and they are more able than they think to take their next step on the property ladder.

This is because higher house prices have increased the equity of those still living in their first homes, with 45% feeling that their equity position has improved over the last year, but they are still uncertain and over a third are considering improving their current home rather than moving and this could add to the supply shortage of first time buyers.

The report explains that today’s typical second steppers bought their first property in 2012, when the average price of a first time home was £140,004. Based on the latest house price figures, selling their home now for the average first time buyer price of £205,723 would provide them with an average equity of £105,068, around two thirds of which has been boosted by house price growth over the last four years, with the rest coming from the initial deposit and mortgage repayment.

This average equity of £105,068, which has more than quadrupled from just £23,643 four years ago, is equivalent to 32% of the average price of a typical three bedroomed detached second stepper home at £331,796.

The findings show that the gap between the sale price of their current property and the cost of their ideal home, typically a detached property, is £126,000. However, the average equity level of £105,068 from the sale of their first home can help to reduce this gap by 83%, meaning that second steppers need only add an extra £21,005 to their existing mortgage.

Other factors have also improved for second steppers, including record low mortgage rates and better home affordability. Higher levels of equity built up in the past four years have contributed to home affordability for first time sellers, improving from 7.2 times UK gross annual average earnings in 2012 compared with 6.6 in 2016.

But despite these favourable conditions some 39% of second steppers recently surveyed think it will be more difficult to sell their existing property this year compared to 12 months ago when it was 18%. Some 34% are also considering staying put and improving their homes rather than moving.

The report reveals that 26% are worried about the uncertain economic climate, while deposit size remains a key challenge for 29% and 32% of these new and growing families are struggling to find the right property.

‘Second steppers are yesterday’s first time buyers and the conditions to help them climb to the next rung on the property ladder are better than they’ve been for over four years. Despite this, many still feel that things are tough out there and that it’s getting more difficult to sell your first home and move up the ladder,’ said Andrew Mason, Lloyds Bank mortgage director.

‘Second steppers are telling us that finding the right property can be tough, and because of that, they’re delaying their move. However, if too many second steppers hold out for a long time for their dream home this could reduce the availability of homes for first time buyers and slow the market,’ he pointed out.

The research also found that 63% of second steppers want to move due to the size of their current property. Some 39% stated that their current home is too small for their needs and 17% wanted to move to a new area.

However, some 67% have changed their reason for moving since they initially considered the move, with family being the main factor. Some 32% originally sought more space but now need to move to accommodate a growing family, while 20% now want to move to be nearer good schools.