Why climbing the property ladder is getting harder

Not only will there be fewer rungs on the ladder in future, but people may not clamber on until they are in their forties
The housing ladder has been one of the most frequently used metaphors of recent years. It is not about to fall out of favour any time soon, but its meaning could change. It will be as if its size has declined from the 3.8m Xtend & Climb Pro to the 1.66m Aluminium Telescopic, or a similar model of ladder within the B&Q range.

Property market commentators are not only predicting that there will be fewer rungs on the ladder, but also that people will climb on to it later in life, in their mid to late thirties, or even in their forties. The archetypal series of steps up the ladder has always been: studio or one-bedroom flat, two-bedroom flat, three-bedroom terrace, four-bedroom semi, five-bedroom detached house. At each stage of the ascent, the homebuyer was contemplating the next move, relying on equity and a plentiful supply of mortgages to make the dream of relentless upward mobility come true.

In future, however, as Yolande Barnes, residential research director of Savills, forecasts, the aspiring owner-occupier will remain in rented accommodation much longer, accumulating the cash necessary to make the leap into the threebedroom terraced house.

This state of delayed dwelling gratification will be one consequence of the new order in the mortgage business. Banks, determined to show that they have learnt lessons about prudence, will continue to demand that borrowers provide large deposits or have parents as guarantors. Banks will also continue to be pernickety about clean credit records; people who persistently make late credit card payments are likely to be penalised, even if they are in regular work.

This week’s housing statistics illustrate how the lack of finance is causing homebuying habits to change. Estate agents say that inquiries have risen, but mortgage lending was down in April, suggesting that mortgage applications are being turned away. The number of sales remained steady, however, showing that people with cash are doing deals. Some of these buyers are snapping up rental properties, suspecting that demand for such accommodation is not set to subside.

The expectation that homeownership could become, for many, a mid-life rite of passage celebrated in a three-bedroom terraced house has implications for the studio flat — the traditional first rung of the ladder. As we report on page 15, the prices of these homes have fallen more steeply than those of roomier types of lateral living. This arises partly from the difficulty in obtaining a mortgage: lenders think that a bijou home’s chance of appreciation may be small.

There are exceptions, however. If a studio flat is a pied-à-terre that will secure for an upwardly social mobile purchaser a foothold in a smart London postcode then it may sell within days. There are also people who more interested in a home that is easy to heat and to clean than in its future value. For these people (they tend to be tidy) the first rung of the ladder will always be as far as they want to go.

The new euro dash

Since the beginning of the year, European buyers have been exploiting sterling’s weakness to go bargain property shopping in Britain. The Italians have been particularly eager to acquire London houses convenient for Harrods. But now the tentative recovery of the pound — and large discounts — are turning the thoughts of the British to real estate in Europe, where prices are down by an average of 25 per cent. Businesses such as Currencies Direct say that there has been a 20 per cent increase in clients changing sterling into euros.

For these buyers. Bulgaria, the scene of so many holiday home purchase disasters, is off the map. Spain, although the subject of just as many documentaries about overbuilding and town hall scandals, is proving to be a popular destination.

This is partly because, as we report on pages 8-9, the Costa del Sol authorities do not now intend to compel developers to demolish all schemes built on unauthorised land (permission for this construction was given by various corrupt council officials).

But the bargains are the biggest draw. Flats for sale at €1.6 million are changing hands for under €1 million. For cash-strapped developers, it seems any price — within reason — can be right. There are concerns, however, that such money-off opportunities may encourage some buyers to overlook planning consents.

Every Spanish property specialist has a tale to tell of a member of the British professional classes who became so enamoured of a villa by the sea that he would not listen to any warnings. The purchase turned out to be a holiday romance, with an unhappy ending.

Whitewash not greenwash

The Spanish-style whitewash is one of the answers to global warming, according to Steven Chu, the Nobel-prize winning US Energy Secretary. Slap on some white paint and the resulting cooling effect means that there is less need for air conditioning. He believes that building regulations should be changed to insist that all flat roofs receive this treatment. The picturesque effect is shown left. Cheap and virtuous, could this be the ultimate credit crunch makeover?

anne.ashworth@thetimes.co.uk