The financial effort to buy a home is growing

18 Sep

This year’s report confirms most of the trends pointed out in the 2018 edition, especially the three main ones. In the first place, that the budgetary flexibility of potential buyers begins to reach a ceiling in the face of price rebound. Secondly, the percentage to be financed continues to increase as a strategy to compensate the increases. And thirdly, that the decision period for the purchase of a home continues to be extended.

In addition, and according to the date in the report, the percentage of young people (respondents between 25 and 35 years old) who wish to buy a home seems to have stabilized around one third of the total of the applicants. A figure that seems to call into question the widespread opinion that millennials are being expelled from the residential market.

Unlike the last two years, “improving current housing” is no longer the main reason for the purchase. In 2019 this is “change from rent to property”. This is stated in 43.7% of respondents. Third, there is the desire to “form a new home,” the aspiration of 20.7% of respondents this year.

It takes longer to find housing because of prices

The report points to the rebound in prices as the cause behind the extension of the period of active search for a home. The percentage of people who have been doing it for less than six months is reduced again for the second time in a row. The same goes for those who have been between one and two years old, which allows us to deduce that this is the most common period it takes to find a home.

A similar evolution is recorded in the purchase decision period. In fact, in 2019, the percentage of people who expect to buy a house at one year view decreases to a little more than 7 points compared to 2018, influenced, most likely, by the expectation of an adjustment of its value. Another fact to highlight in this variable is the significant increase in uncertainty regarding the decision to purchase the home, which increases slightly less than 4 points.

The current bullish cycle also seems to explain that the transfer between the different budget bands has reached a ceiling. It is an especially relevant statement for respondents with a budget of more than 300,000 dollars, which in 2019 breaks the upward trend of recent years. The rest of the budgets analyzed – up to 150,000 dollars and between 150,000 and 300.00 dollars – have an evolution, both downwards and upwards, very discreet.

Regarding the amount to be financed, the trend is very clear: fewer and fewer people have to apply for a lower mortgage and more have to apply for it. On the other hand, the vast majority of respondents expect to contract a loan of up to 210,000 dollars (66.4%, 2.4 points more than in 2018), which also in a majority percentage will be in the form of a fixed interest mortgage (42 , 4%, almost 15 points more than the supporters of the mortgage at variable interest).

Dedicate between 30% and 50% of the salary to the mortgage payment

Finally, the report of Planner Exhibitions and ST Appraisal Society deepens the financial effort required to buy a home, on the one hand, and the impact that this may have on the daily consumption of future owners, on the other.

In relation to the effort, the report confirms its upward curve, to the point that more than half of the respondents (53.5%) affirm that they will have to dedicate between 30% and 50% of the income to the payment of the Mortgage and 7.2%, allocate even more than 50%. In addition, this increase in the financial effort begins to have a very negative impact on daily consumption, at least for 48% of the respondents, which ensures that they will have “difficulties to face unforeseen events”, “be aware of each expense” or “suppress their daily leisure”.