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Last orders for first time buyers

10th May 2005 | back to article listings BACK    print this article PRINT

With house prices showing continued signs of increase into 2005 many would-be first time buyers are finding it difficult to get onto that first rung of the property ladder. Younger prospective buyers often lack the necessary funds to put down a deposit, especially in more expensive parts of the country such as London, and are reluctant to pour money into long-term renting.

Faced with this dilemma many are deciding to turn away from conventional housing altogether, targeting a wholly different property investment market more suited to their financial capabilities, and seeking to purchase their own pubs, in a bid to make a business out of a home. The main appeal is that on average, pub prices are lower than house prices, the market having remained steady where the housing market did not. Subsequently a pub can be well within price range for a first time buyer prepared to take on a so-called "creative mortgage".

Figures released this week indicate that property values in the UK stood at 12.6 per cent in March than at the same time last year, with house prices having increased by 2.1 per cent during the month. According to data released by the Office of the Deputy Prime Minister (ODPM), the average home in the UK cost £183,346 in March up from the February figure of £179,491, and house price inflation was also shown to have risen notably across all regions.

Conversely, pubs can often go for under £100,000, and tend to offer more rooms and development opportunities than regular houses. However, the important thing to bear in mind is that running a pub is a definite lifestyle choice, and a casual first time buyer looking for a good property investment opportunity might not be suited to the stresses and pressures this comes with. For this reason investors should be careful to avoid the lure of cheap prices if unsure about becoming a full-time publican.

For those investors looking to expand their portfolios and buy additional properties, securing a pub could be an appealing alternative to buy-to-let. Such an investment offers a change of lifestyle that older investors might be looking for, or staff could be hired to run the pub as a business. Figures estimate that a good freehold trade can garner a return of between ten and 20 per cent. Furthermore, getting the right mortgage need not be too much of a headache, with several banks and building societies offering commercial property mortgages, including the Royal Bank of Scotland, Abbey Business, Northern Rock, Barclays and Allied Irish.

Committed buyers are also advised to make sure they have a good business plan to present to mortgage lenders, breweries and pub management firms.

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