New research by comparison website uSwitch has revealed that second steppers are not saving money for their next property purchase.
The findings showed that the majority of first-time buyers are not currently saving to strengthen their buying power when they decide to make the next step up the property ladder.
More than six in ten first-time homeowners are instead depending on the rising equity stake in their property to pay for their next deposit. What’s more, nearly half (44%) of first-time owners have no plans in place at all to save for their next home.
However, it’s a potentially risky strategy as rapidly increasing house prices could lead to them facing a substantial shortfall when they do decide to step up the ladder.
In many cases, second steppers will be upgrading from a flat to a larger house; maybe an apartment to a semi-detached or terraced property. According to Zoopla, house prices have increased by 21% over the last decade while prices for flats have risen by only 15%, which means that some second-steppers could be lulled into a false sense of security when it comes to using equity to fund a move up the ladder.
In many parts of the country price rises for houses have comfortably surpassed those seen for flats, so those looking to upgrade to their second home need to be aware of their local market and plan their next steps carefully.
The North West is where the difference in price growth for homes and flats can be seen most starkly, with houses in Preston, Lancashire growing 16.5% faster than flats in the city. House prices in Preston have grown by 8.5% in the last ten years, while flats have gone the other way, with average prices falling by 8%.
It’s a similar tale in Colchester, Essex, where house prices have grown by nearly a quarter since 2006 while the value of a flat grew by only 13%.
This is not, however, a trend that extends across the whole of the country, with flat prices growing faster than house prices in many parts of the UK. Aberdeen is one example – house prices in the oil-rich Scottish city have risen by a massive 47% in the last decade, but this is still beaten by the 57% rise in prices experienced by flats.
The findings from uSwitch also showed that more than six in ten second-steppers haven’t put any savings aside to cover the associated costs of moving home – things such as survey costs, removal fees and stamp duty – which usually average out at around £12,000.
Once again, second time buyers are advised to plan well in advance to make sure that they know the sort of second home they can afford and how much they need to save to make it feasible. Additionally, second steppers are also advised to speak to a range of mortgage providers in order to source the best possible deal.