Home affordability for Second Steppers – those home owners still living in their first home but looking to take their next step up the property ladder – has improved in the past year as a result of higher equity levels, according to the latest Lloyds TSB Homemovers Review.
Housing affordability for Second Steppers – calculated as the average price of a typical Second Stepper home less their current equity position as a ratio of average earnings – stood at 4.4 times gross annual average earnings in June 2013.
On this measure, affordability has declined significantly over the past decade when it was 2.9 in 2003. There has, however, been an improvement on June 2012 when the ratio stood at 4.9. This recent improvement reflects that today’s Second Steppers include those who bought their first home after the peak of the recent housing market cycle in 2008 whereas a year ago the typical Second Stepper had purchased in 2007 at the peak of the housing market cycle.
The typical potential Second Stepper in June 2013 bought their first home in 20083. Such a homeowner is, on average, estimated to have an equity level of £21,2004 – equivalent to 13% of the average price for a semi-detached house – a typical Second Stepper home – of £165,059. This is a marked improvement on a year earlier when the typical Second Stepper equity level (£1,120) was estimated to be less than 1% of the average price for a semi-detached home.
The level of equity a potential Second Stepper is estimated to have is at its highest since 2009 when it was, on average, estimated at 17% (£28,200) of the average price for a semi- detached home.
Despite this improvement, equity levels for Second Steppers remain low by recent standards. For example, the typical Second Stepper in 2005 was able to fund close to half (44%) of their next home through equity built up in their first property.
In addition, with the average cost of moving estimated at close to £9,0005, it is unlikely that the increase in equity over the past year will be sufficient for many potential second steppers to put down towards their next hom
North-South divide in second stepper housing affordability
There is considerable variation in housing affordability between regions, with northern regions more affordable than southern regions for second steppers. This is largely a reflection of the lower prices for second stepper properties in the north. The West Midlands and East Midlands (both 3.1) are the most affordable regions for those in their first home looking to take their next step on the property ladder. While London (5.7), South West (4.6) and South East (4.5) are the least affordable.
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