The number of first time buyers in the UK property market has climbed to a two-year high, according to the latest First Time Buyer Tracker from Your Move and Reeds Rains estate agents.
Last month, 32,300 first time buyer transactions were recorded, up by 14.9% on March’s 28,100 and a huge 50.9% higher than the 21,400 seen in January. These figures arrive as the 1st April Stamp Duty deadline for buy-to-let landlords and second homebuyers passes, meaning that much of the competition for smaller properties has subsided.
The significant sales surge in April means that the monthly number of completed first time buyer transactions was the highest in around two years, with sales surpassing totals from the last 22 months, since the 33,300 total reached in June 2014.
Compared to last year, completed first time buyer sales have soared by 37.4%. In April 2015, just 23,500 first time buyers completed on property transactions, meaning 8,800 more first time buyers got onto the housing ladder this year than last – an encouraging signal to aspiring first time buyers.
The Director of Your Move and Reeds Rains, Adrian Gill, says: “This surge in sales shows that demand is steadfast among first time buyers, despite upward movement in house prices. In the short-term, first timers may be finding that competition for properties has eased slightly following a period of intense pressure on landlords to meet the Stamp Duty surcharge deadline at the beginning of April. With a chronic shortage of homes, one man’s loss is another man’s gain. Subdued landlord demand following the changes is offering some temporary light relief to first time buyers. Less competition from landlords expanding their portfolios means more houses to buy for first timers.
“Scratch beneath the surface of these positive monthly figures and a darker long-term picture emerges. The Government’s restrictions on the buy-to-let sector may seem to play into the hands of today’s first time buyers, but future first timers could pay the price.”
Number of First Time Buyers at Two-Year High
He continues: “Demand for first time properties to buy remains red hot, but demand for cheap properties to rent is also searing – fuelled by a swelling population and increasing desire among many to move around the country following career opportunities. Cutting landlords out of the equation will simply drive this demand harder still, pushing up rents and making saving for a deposit for a first home more difficult. First time buyers are tenants too.”
In the past 12 months, the average first time buyer spent over £20,000 more to purchase their own home. In April, the typical first time buyer property cost £168,656 – 13.6% higher than the £148,483 they spent in April 2015.
As a result, the average first time buyer deposit has also risen significantly over the past year.
Currently, the typical first time buyer deposit is £27,290 – 13.8%, or £3,300, more than the £23,990 paid last April.
However, in a sign of continued competition in the lending market and strong financial support for first time buyers, the average mortgage rate has dropped by 0.45 percentage points in the last 12 months, now standing at 3.10% – the lowest average mortgage rate on record for first time buyers.
The latest Mortgage Monitor from e.surv provides further evidence of this trend, showing that small-deposit lending accounted for 19.1% of house purchase approvals in April, compared to 16.3% last year.
Gill comments: “House price growth continues to be the thorn in the side for many first time buyers. Even as lenders compete to attract first time buyer business by lowering rates to record lows, mortgage repayments and deposits are getting more expensive due to house prices lifting at the lower end of the market. This is a supply issue. Any efforts to increase housebuilding and stimulate supply will take time. There is no magic wand solution to the first time buyer housing crunch.
“Wider economic woes may also be playing a part. Recently, to some extent, improved wages have helped alleviate the pain of rising house prices. But with growth slipping and the uncertainty around the EU referendum slowing down the economy, higher wages are no longer the salve they were. Thankfully, lower rates and improved availability of financial support to first timers mean mortgage repayments remain affordable against all the odds.”
London continues to be the most expensive place to buy a home, with first time buyers paying an average £322,613 in the three months to April. The second most expensive region is the South East, where the typical first time buyer property costs £215,444. In every other region of the UK, first time buyer prices drop below the £200,000 mark.
Northern Ireland is the cheapest region in the UK to purchase a first home, with an average price of £99,860 – the only region where first time buyers pay less than £100,000.
Despite its high prices, the South East is home to the greatest number of first time buyers, with 16,300 purchasing a property in this region in the three months to April. London saw the next highest level of activity, with 11,300 sales.
Gill concludes: “London continues to be a hotbed of first time buyer activity, as young professionals flood to the capital for work. But sellers in the surrounding regions, like the South East and East Anglia, are being boosted by buyers priced out of the capital and looking to buy a home in a cheaper region. Towns like Maidenhead and Reading have seen stellar demand as commuter towns with bright local economies and cheaper houses than the capital. Sellers in these regions can turn a tidy profit by capitalising on this trend.
“New career hotspots are also vying to steal the capital’s crown. In the West Midlands, Birmingham continues to attract growing numbers of young professionals, while in the North West, Manchester is also a thriving hub. For the moment, London remains the beating heart of the UK property market, but as high prices force first timers further afield, the rest of the country is benefitting from this migration and other cities may soon take the lead.”