What options are there if you’ve been priced out of the property market?

Aspiring homeowners are finding it more difficult than ever to get on the property ladder. Property prices have risen significantly over time while wages have remained stagnant, leading to many first-time buyers discovering that they’ve been priced out of the market.

The average salary required for a first-time buyer to purchase a home in the UK’s biggest cities has risen by 18% in the last three years, according to research from Hometrack. It’s an increase that’s far above wage growth.

The average first-time buyer now requires a salary of almost £53,000. This compares to the national average salary of £29,588, according to the Office of National Statistics. In 2015, the figure was £27,409, representing an increase of almost 8%, significantly falling short of the growth Hometrack estimates is needed.

The research looked at the biggest 20 cities in the UK, which are often attractive to young workers seeking career progression opportunities. Only three have become more affordable since 2015; Cambridge, London and Aberdeen. However, despite falls, many aspiring homeowners are still finding that purchasing a property in these areas is out of reach.

The cities experiencing the largest year-on-year house price growth were Liverpool, Glasgow and Nottingham.

If you feel like you’ve been priced out of the property market, it doesn’t have to mean giving up on your dream of owning your own home. There are still options open to you.

Shared ownership

Shared ownership properties allow you to purchase a portion of a property using a mortgage while paying rent on the remaining share.

Often you have control over how much of a property you buy, starting from 25%. If owning a property is out of reach because you can’t access the level of lending needed, shared ownership allows you to reduce the mortgage you need to take out.

With the majority of shared ownership properties, you’ll be able to purchase greater levels of equity over time. This gives you an opportunity to work up to owning your home outright at a pace that suits you.

There are some things you’ll need to consider when purchasing a shared ownership property, such as balancing mortgage and rent payments and maintenance costs. But it can be a valuable way to get your foot on the ladder.

Help to Buy equity loan

The Help to Buy equity loan was designed to give first-time buyers a helping hand when buying a home. It helps with two areas; you’ll need a deposit of only 5% and a lower mortgage value.

If you choose to use the Help to Buy equity loan, you’ll put down 5% cash deposit. The loan will then cover up to 20% (40% in London) of the property’s value and you’ll use a mortgage for the remaining 75%.

Again, there are some things to consider when using Help to Buy. First, the home you buy must be newly built, limiting your options, and have a price tag below £600,000. Secondly, you will need to pay the loan back and the government will take the same percentage of the sale price you opted for when taking out the loan when the property is sold, so the loan will increase if the property’s price does. The loan will also start to incur interest after five years.

The Help to Buy equity loan scheme will run until 2020.

Widen your search area

Within a city, there will be a huge amount of variation between property prices, with pockets that are more affordable.

It might mean making some compromises, such as a longer commute, but if home ownership is a priority, consider expanding your search area. Even within the same postcode, you’re likely to find that some homes are far out of reach while others might be attainable.

Pick out an area that’s considered to be ‘up and coming’ and you could stand to make bigger gains when the time comes to sell. If this is your plan, look at development projects that will add value to the property, such as transport links.

Assess your expectations

Hometrack’s research looked at average house price growth in the cities it assessed. For many first-time buyers, it’s unlikely to be the first step they take on the property ladder.

If you’ve been looking at trendy city centre flats or large family homes with plans to buy, it may be time to reassess your expectations. A starter home might not be where you plan on living long term, but they give you a chance to build up equity, acting as a stepping stone to your ultimate home ownership plans.

People rarely step on the property ladder and stay in their first home forever. With this in mind, choosing a property with plans to move on in a few years can be beneficial.

Ask your family for help

It’s well-known that the Bank of Mum and Dad is financing more property deals. If parents or grandparents are in a position to help you financially, it can speed up the home ownership process.

But when you’re stepping on to the property ladder, it’s not just cash from family that can help. Having relatives that are homeowners act as guarantors on your mortgage can mean you’re able to secure more money to purchase a house.

When you’re taking the first steps on your journey to home ownership, we can help. The mortgage market is huge, and many lenders don’t have a presence on the high street. If you’re struggling to find the right lender for you, we can search the market with your needs in mind.