We have a tendency to lose sight of the factors that determine the health of the private housing market. The number of Chains completed and the time and effort needed to achieve these obviously reflects the health of the market.
All chains are broadly the same. At the beginning there must be a cash/first time buyer who does not have a property to sell and at the end there must be an owner who does not need to buy another property. They may be emigrating, going into rented accommodation, already own another property or have died etc.
The number of first time/cash buyers is obviously a huge factor in determining the state of the housing market. If they disappear chains cannot begin to form and the market grinds to a halt. Hence the almost constant concern and publicity about the number of cash/first time buyers in the market. Traditionally 40 to 50 percent of those looking for a new home have been cash/first time buyers but recently this figure has halved. According to Halifax research the number of first-time buyers fell to a 25 year low in 2005 and house sales for the year hit a 30 year low.
This low is not suprising given the rise in house prices over the last five years. The average frist time buyer now needs a deposit of almost £24,000 which is 2.5 times the amount required five years ago. Wage inflation over this 5 year period has been muted so in real terms the deposit required has doubled. It is now taking an average of five years to save this deposit and the average age of first-time buyers has risen from 30 to 34. The increase in the rental sector, imminent rise in student tuition fees/debt and other demographic factors suggest these trends are set to continue.
Whilst the number of first time buyers around receives much publicity the number of Chains that fail to complete is not much discussed. In some areas as many as 50% of apparently good Chains fall apart before completion. One reason is the prevailing wisdom is that there is no point in seriously looking for a new home until an acceptable offer has been received for your present home. On receipt of an acceptable offer the search for a new home can begin in earnest. Sometimes no suitable property is found or decisions made under pressure or in haste are reconsidered as the completion process creates time for reflection. Swapping homes can reduce this delay.
