Nigel Pascoe. (0140769)
IT IS now virtually impossible for young people to get on the housing ladder without financial help from their parents, property professionals have said.
The average local market house price rose £55,000 over the past year to £345,000, and mortgage lenders are looking to tighten their belts in the wake of the global credit crunch.
No lender in the island currently offers a 100% mortgage, putting the first rung on the property ladder out of reach of many who do not have help from their parents.
Nigel Pascoe, director of lending at Skipton Guernsey, one of the island’s biggest lenders having loaned out almost £28m. so far this year, did not expect any early improvement in the situation.
‘We are now often only seeing young people come into the market if there is parental assistance. I think that is very much a trend that is going to continue.
‘Lenders are looking at their own policies and the 100% mortgage is one of the things that has stopped. I don’t think that it will be available for the immediate future.’
Policy Council figures put average gross earnings at £30,400.
One young homeowner said she would never have been able to buy her flat without cash from her parents.
The 26-year-old said that buying her £145,000 flat a year ago had been incredibly difficult.
‘My parents gave me £10,000 which, together with the £10,000 I had saved myself, covered the deposit and legal fees.
‘It’s becoming unheard of for a young person to buy a property without the help of their parents.’
The woman said she found shopping around invaluable and it was important to have a lender explain the details of a mortgage thoroughly.
‘My lender made me think about the whole process of how much I would be spending each month, not only on the mortgage but other expenses too. It really helped me plan.’
Kelvin Seeds, from Goldridge Estate Agents, agreed that it was more difficult for young people than it had been for a long time.
‘What we find with young people buying for the first time is that the conditions of sale are signed and then we get the deposit cheque that nine times out of 10 has been signed by the parents,’ he said.
‘If mortgage criteria stay as they are, unless you have some parental help or win the lottery you are going to struggle.’
Article posted on 23rd August, 2008 - 2.30pm
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9 Article Comments
Property is your single biggest purchase which has a huge impact of peoples standards of living and quality of life. In short the more money you pile into bricks and mortar (that’s all it is) the less available for other purchases.
So this is the No.1 priority issue for the States to address which they have consistently failed to address. The price of milk is about the consumer issue they’ve messed about, an answer to a question nobody has asked.
The biggest issue in tackling property regards supply and demand and the strangulation of the supply side by law through the IDC with endless meaningless planning controls and ‘zones’.
If these were relaxed or indeed removed completely a free market would be set free to solve the supply side. In particular farmers, freed from restrictions on agricultural land and able to decide what to do with THEIR PROPERTY could choose to allocate fields for building leaving them a more realistic area for Guernseys small agricultural sector. The amount of scrub land (un-used agri land) in Guernsey is colossal.
There’s also the issue of what States Housing is in the business of. They do not supply emergency housing which is left to a quango. They do not address hih property prices. Their open/local market ‘rules’ are a travesty - foreign staff for the finance industry are filling up local market flats further inflating prices to locals.
And Housing now plans to give away more public land to build for foreign staff. Their policies and strategies are hell bent on not addressing any real local issue at the lower end of the market which in my view is their priority and in fact all Housing should be about as the rest should be left to the private sector.
Why is a 2 Bed house in New Zealand £45k and Guernsey £280k? Yes NZ may have more land but what we do with our land and how we strangle the supply side with States restrictions is the main reason for ruining our standards of living. It’s about time the States did something effective in this session to address this woeful State controlled (red tape overload) market by removing planning zones and controls.
Yes, house prices have increased dramatically, but so have wages! And many of our grandparents could never afford to buy a property and spent their lives living either in rented accommodation or with their parents.
Many of us who have bought houses were only able to do so by sacrificing an expensive social life and doing part time jobs to save for a deposit. It is possible if you are prepared to forego the luxuries until you are in a more comfortable position - you can’t have your cake and eat it!
It’s true, i have tried looking to buy somewhere recently and it’s impossible! One of the best ways is to get pregnant and in a year or so time can get a house off the states for little rent if any!
while some of your comments are true, johnnyB, some are just plain ridiculous. So we should allow houses to be built on “scrubland” - just how ugly would Guernsey become? It is already pretty built up and the remaining open spaces are vital for our sense of well-being, and for wildlife. The issue is really the idea that everyone expects to be able to own their own home - owner ship is far higher in Guernsey than in most european countries.
I agree with Nikki. An expectation of home ownership has developed in Guernsey which is far higher than in many European countries. Its another example of us not realising or appreciating how lucky we are as a whole. Having said that, where we do fall down is in relation to the supply of decent, affordable rental properties. Many Europeans rent properties until their early 30s before buying, but they have a good rental market to rent from. Purchasing here is really the only alternative to staying at home with the parents.
The idea that parents are releasing equity from their overpriced estates in order for their children to be able to get into heavy debt in order to buy overpriced estates and so keep the market artificially high is a nonsense.
Home ownership is a not a sign of societal success. We can’t even develop infrastructure to 21st century levels because of this crazy obsession to get into debt. The politicians need to act, but they won’t as many of them have vested interests in high property prices.
Its not just in Guernsey it is a worldwide phenomenon!
I have no idea where the first respondent gained their facts about NZ prices! - the true average house price figure in Auckland is just below 500,000 NZ dollars (do not convert this into pounds without factoring in the lower NZ wages as well).
Land is scarce everywhere and if you want to own a property you have to expect to work damn hard.
The concept of parents helping their children to buy their first home is not new, this is something that has been happening for centuries so why is it such a shock now?
Young people should look at the recent credit crunch and leveling of house prices and rejoice! its an excellent opportunity to save for that deposit.
Spot on Wil !
Real estate prices are high in all desirable locations. New Zealand has one of the lowest densities of population of the world, as does Australia, with massive areas of land to develop for housing, yet people naturally wish to live near where the jobs exist and so real estate prices in the main cities and suburbs soar as demand far exceeds supply.
It is a huge misconception that high land prices in Guernsey are unique. Local students are misfed such propaganda and make up their minds that they cannot return, but try buying a house in the SouthEast of England. Their earnings potential here is very high which makes servicing a large mortgage feasible. Guernsey is not getting any bigger, has full employment and is a highly desirable place to live. Of course house prices will be high. But are they really out of kilter with real estate prices in other highly desirable locations ? We all know of people who have cashed in their local market property here to buy somewhere much cheaper, only to find that their earnings potential and quality of life in the new country is much lower than in Guernsey. There are good reasons for Guernsey’s high house prices and if prices were much lower then we would have maybe 90,000 people living here as many Guerns living abroad would rush back. Those lower prices would not stay low for long !
Parents owning valuable local market properties and who have major equity tied up in those properties are ideally placed for helping out their children, whether by lending them the equity required or acting as mortgage guarantors. This has been going on for years and is far from unique to Guernsey.
It doesn’t however address the problem though of those young locals who are not fortunate enough to have parents who can help them out, and who have no easy way of finding the equity required to get onto the property ladder. That sector needs more high quality rental accommodation and an expanded shared equity housing scheme. Far better for them to own say 70% of a house that they actually want to live in with the ability to buy out the remaining 30% over a period of years, than to be perpetually renting sub-standard rental accommodation. That seems to be by far the main area to address.
With low unemployment and food average earnings, landlords should find local market tenants a financially attractive proposition but why would anyone want to build property for long-term rental income when the capital growth opportunities from selling those properties to owner-occupiers is so attractive. A States incentive scheme for developers to build good apartments designed specifically for rental purposes might be a good way forward, but the need to hold investment properties for 5 years to escape dwellings profits tax is quite a big disincentive for anyone involved in property development. Maybe reducing that retention period to 2 or 3 years would increase the supply side of such properties.
Define ‘need’? Just becasue a 20 year old argues with his or her dad and wants a house doesn’t mean he or she deserves one. Tough, save up, sacrifice your x box, holidays and Jimmy Choo shoes and save up. Like we did.