An Analysis of Economic Factors Affecting First-Time Buyers; A case of the UK housing market.
De Silva, Jordan
Cardiff Metropolitan University
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This dissertation presents a critical analysis of the key economic factors within the UK housing market, and how these affect first time buyer’s and their decision to invest. It looked at key macro-economic variables such as house prices, wages, inflation, interest, and mortgage availability to determine how these have changed over time and their subsequent effect on first time buyers. The main purpose of this dissertation was to determine the macro-economic factors that influence first time buyers the most, and how these have changed over time. The issue of the UK housing market, and how accessibility and affordability have all become much more difficult for first time buyers in recent years, is one that is regularly discussed in the media. This study looked to understand why and how accessibility has changed for first time buyers, and the key economic forces behind this. A whole generation of millennials have been aptly dubbed ‘generation rent’. This is due to a lack of house building, soaring private rents, and the increasingly stringent criteria set by mortgage lenders. House prices are higher than ever, so are deposit requirements, and it has never been more difficult for a young person to buy his or her first home. This paper looked to see what has changed in the market, and in particular since the economic crash in 2008. By looking at the profile of first time buyers pre and post 2008 this research evaluated the main economic forces in the market, and their effect on people looking to take their first step on the property market. The conclusions of this research are based around how house prices, deposit requirements and personal income are the key economic factors that affect first time buyers. By using the primary research data, we can see that an average first time buyer post 2008, will likely have a more expensive house and higher deposit percentage than that of a buyer from before 2008. They are also generally older, with a higher income, as people now need to work for longer and earn more in order to be suitable for the stringent lending criteria. The research analysed how an asset bubble in house prices, that was kept unsustainably high by irresponsible lending, burst in 2008 causing the crash and changing the market drastically. This bubble bursting is what has led to first time buyers post 2008 facing much harder economic times and much more stringent lending criteria.
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