Andrew Vine: House price recovery snatches ladder further out of reach for young people

A COUPLE of young friends let their hair down at the weekend to belatedly toast the arrival of the New Year once the crowds had thinned by going out for dinner.
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Not at all unusual for a couple in their 20s, both with secure and well-paid jobs to go out to eat, but for them it was a rare treat. The Italian restaurant where they went was chosen for its modest prices, and they shared a bottle of the cheapest red wine on the list.

It’s been months since they had a night out like it, and it did them good. The reason it was such an unusual occurrence to eat out is that they are saving to buy a house, and their joint expenditure is rigorously controlled. There won’t be a holiday this year, even though both work hard and could do with a summer break, and they’ve moved back in with parents to keep living costs to a minimum.

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The funds in their joint account are creeping ever upwards, and yet the amount they need for a deposit on a home of their own remains tantalisingly just out of reach, and with it so do their plans for the future, such as starting a family.

They have friends in exactly the same position, and when they get together their conversation is as predictably about the problems of getting a foot on the housing ladder as discussions about the woefully low return on savings are amongst their grandparents and their circle.

They are luckier than most in having parents with the space to put them up and the means to effectively subsidise them by covering the heating bills, council tax, and even food. Others are less fortunate, feeling they are climbing an escalator travelling downwards in trying to save because rent consumes so much of their income.

For young couples like this, the signs that the housing market is picking up after a long slump come as bittersweet news, because the amount they need for a deposit will move just that little bit farther from reach.

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It is beyond question that things are on the move again, a survey by the Nationwide finding that a 1.4 per cent increase in prices during December was the biggest since the summer of 2009, and the Halifax concluding that consumer confidence has risen sufficiently to hold out the prospect of a relatively buoyant market during 2014. And that’s good news for the economy in general, the construction industry which took such a battering during the downturn, and even for those young people trying to get a foot on the ladder because it will eventually filter down into bolstering the security of their jobs.

The signs that things are steadily improving are to be seen in the number of for sale signs springing up in our streets, and the leaflets from estate agents dropping through the letterbox to say that they have buyers waiting for suitable properties.

The waiting is one of the problems for the young. A shortage of homes for sale has, because of simple supply and demand, made life more difficult for them in finding somewhere they can afford.

Where the housing market is headed is causing divisions within Government. Again at the weekend, Business Secretary Vince Cable voiced his concern that a new, potentially ruinous bubble of inflated prices followed by a crash looms, while David Cameron and George Osborne insist that the market is growing steadily and responsibly, 
forming a bedrock for economic recovery.

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Such debate is academic to a young couple counting pennies so carefully that a meal out becomes a special occasion because of its rarity.

But one thing my friends give thanks for as they watch their savings grow month by month is that they are not caught up in the nightmarish hothouse that is the property market in London.

There, a relative bought a dilapidated ex-council flat 18 months ago for what then seemed an eye-wateringly inflated price, only to look on in astonished disbelief as other homes in the same block have rocketed by 25 per cent, with furious bidding wars between competing buyers sending prices soaring.

And this for a two-bedroom 
flat that requires a great deal spending on it in a pretty grotty part of town.

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The sums involved would buy at least a three-bedroom semi-detached home in any number of attractive areas in Yorkshire.

The spectres of negative equity, of bills that can’t be met, of mortgage payments that can’t be managed hover at the shoulders of those involved the next time the economy takes a turn for the worse.

Let’s hope, for the sake of all those young couples out 
there saving to buy their first home, or moving to somewhere bigger and better with a 
growing family, that the recovering market in our region behaves with more sense – and 
an eye to long-term strength – than it is in a capital so often held 
up as an example of what we in the North should aspire to become.