How far will prices have to fall before you get involved? Photograph: Sarah Lee
There was further evidence of a slowdown in the housing market today, with news from Hometrack that prices had fallen for a fourth month in succession. The average price of a property in England and Wales is now £174,700, and according to a separate survey from the Centre for Economics and Business Research, it could fall by a further 2.5% in the year ahead.
No wonder first-time buyers have a spring in their step - if prices continue to fall some of them may actually be able to afford to buy a home. In a feature in yesterday's Observer, Peter Davy described how falling house prices towards the end of last year have encouraged a few more of them to dip their toe into the market, but the number of first-time buyers remains close to an historic low.
It seems obvious that falling prices will attract first-time buyers thwarted only by an inability to raise a large enough mortgage to afford a property. But how far will they have to fall before homes become affordable? The 2.5% drop predicted by the CEBR equates to £8,000 on the average property price it quotes - is that enough to make a difference? Or will they need to fall further for first-timers to be able to buy a home?
And if they do, will they have to nerve to buy? These are often people with little in the way of a deposit, so if prices continue to fall there is a chance that some could move into negative equity, at least for a time. Confidence is sure to play a part, as well as affordability. It's certainly hard to be a first-time buyer in a rising market, but is it any easier when the market is on its way down?
