As London property prices stall or fall could this spark the return of the first-time buyer? Let’s look at both sides of the argument:

London has plenty of them, we have a very young population indeed over 46% of us are under 35 compared with 39% nationally. 10,800 20 – 24-year olds migrated into London in 2003. Indeed 60% of international migrants entering London are aged 18-40 and in theory will be looking for property to buy as they become more settled.

Well, youngsters are earning more than ever before. The average graduate salary is £20,300 meaning a take home pay of approximately £1,270 per month. By the time graduates reach their late twenties this salary has risen to £28,500, a take home pay of approximately £1750 per month. Indeed the average wage in London exceeds £29,000 per year.

Furthermore we are not average in London, City slickers are often earning £100,000 at 28 and London has 13% self employment compared to 11% nationally who in theory earn above income too.

If the average graduate in their late twenties has a partner or friend who earns the same a monthly income of £3500 is generated. With a £57,000 income a mortgage of £156,750 should be achievable with more liberal lenders.

A repayment mortgage at 5% would cost £926 per month still leaving £2574 for fun and bills. 26% of total income would go on the mortgage, a figure far away from the 60% seen in the 90’s crash. Indeed research has suggested that many first-time buyers would be happy to have 50% of their income absorbed by a mortgage, and in addition, interest only mortgages are more common these days. If the couple were prepared to gamble on an interest only mortgage with 50% of their salary gobbled up by payments, a mortgage of £360,000 would be serviceable. In this instance the mortgage lenders have held back the market and behaved extremely responsibly.

£200,000 covers a typical fist time buyer property in a first-time buyer area such as Stoke Newington, Hackney, or Willesden Green. So a £43,250 deposit is required to reach £200,000 at approximately 80% borrowed and 20% deposit, a common and reasonable ratio.

To be sure, if we look at the finances of these young guns they appear at first glance to be riddled with debt. Indeed the average person is saddled with £5000 of unsecured personal debt and this tends to be levered towards the young. The average graduate has £12,800 of debt by the time they reach London.

This should prevent even consideration of home ownership. However, the debt's they have are cheap. The student debt incurred by graduates is at a typical interest rate of just 2.6% the monthly payments for an average graduate on the average salary with £12,800 owed is £78 per month. Graduate loans are offered by Lloyds TSB at 7.8% so 10,000 can be borrowed over 4 years for just £252 per month. Credit Card debt has doubled in the last 5 years but the debt is readily available and cheap. £5000 on a credit card used to incur an interest rate of 22% or more. Now it is likely that the debt is at a special rate of 3% - 5%. Competition has transformed the industry and made debt more serviceable.

The deposit however has traditionally been the problem. With low interest rates and ever more enticing mortgage products youngsters have increasingly been able to afford the monthly payments. Even with a good income saving £43,250 is not easy. Furthermore add 2k for stamp duty, 1k for solicitors, £500 for mortgage fees, and £3000 for moving and initial furniture expenses. The couple would need £49,750 cash to buy.

Physiologically saving £49,750 from scratch, while paying off debt and paying rent, is tough.

Who can help? The MarketPlace at Bradford & Bingley recently reported 17% of first-time buyers are relying on parents or family for the deposit. Indeed the old seem to be far wealthier than the young. They have over £3 trillion of housing assets, 1 trillion in savings and pensions, and a further 1 trillion invested in shares, overseas property, and other sources. Are the oldies loaded? In theory parents who have enjoyed property values soaring by 250% over the last ten years should be more than happy to gift 25k to their children to buy their first property. Although deposits are hard to save, first-time buyer parents have made such huge capital gains, and perceive property to be such a good investment, they should continue to provide the initial funding for property.

Certainly, in many areas such as Islington it is not uncommon for first-time buyers to have £50,000 to £100,000 deposits, usually gifted from parents and family. However with the population ageing, pensions in crisis, people living longer, and parents having increasingly paid for school and university fees etc. are parents about to revolt and say enough is enough? “I am likely to live until 100 and need all my assets.” Also the “lad” culture has hardened many parents. “When I wanted to buy a house I saved for years, alcohol and good times were off the menu.” Are youngsters having it too good and alienating parents?

First-time buyers could rent relatively cheaply until this year. Now rents have firmed and are rising in some areas. Tenants are no longer able to negotiate such a good deal or have free furniture offered to secure a let. Will this force them to enter the housing market? In addition, if prices have stopped rising they can set an achievable goal, save x and have a mortgage offer for x. By the time they have saved the deposit, prices will not have risen 10% so having saved £50,000, first-time buyers will not discover an extra £5,000 is needed.

First-time buyers now don’t have the motivation to buy. If prices are falling or stalling and are not set to rise for few years why bother? The reason so many borrowed deposits in the first place was specifically not to miss a booming market. The fear of being left behind outweighed the fear of huge debts. Maybe they will focus on early debt repayment while renting and waiting for further price deflation? Indeed you could argue that first-time buyers don’t buy because they don’t want to and will use any excuse to get out of it. Undeniably, the age of first-time buyers has been rising consistently throughout the last ten years, but does this reflect our lifestyles more than affordability? We stay at University longer and more of us go - up from 8% in 1961 to 43% in 2003 - and take years out to travel before and after university. Also we work abroad far more than in the early 1990’s.

The average age of marriage is increasing, from 25 in 1961 to 31 in 2001, as is the age at which we have children, up from 25 in 1961 to 30 in 2003. Are we just enjoying our youth more and delaying buying property?

Maybe first-time buyers figures have reached a natural low to reflect our lifestyles and the market will be fuelled at the bottom end in the future by successful international migrants, buy to let investors, and shared ownership schemes.

Conclusion? The best prediction is that there will be lots of predictions, all of which will be spun and justified with hindsight.

Many thanks to Geta2ndOpinion for this article. You can talk to them on 020 7794 9780 or visit their website, www.Geta2ndOpinion.co.uk