Research reveals the strength of first time buyer market in the UK
Residential property sales to first time buyers in the UK have grown 27%, marking the strongest opening half of a year since 2007, new research shows.
There were 146,000 first time buyers between January and June, some 30,000 more than in 2013, according to the First Time Buyers Opinion Barometer from Your Move and Reeds Rains, part of LSL Property Services.
In June alone there were 26,500 first time buyer sales, some 10% more than 12 months ago and topping 26,000 for the second consecutive month, the data also shows.
The last time the opening half of a year saw more first time buyer sales was in 2007 before the financial crisis began to bite when there were 181,500 transactions.
On a monthly basis, there were 26,500 first time buyer sales in June, 10% more than twelve months ago. It was the second consecutive month in which the number of transactions topped 26,000.
The average first time buyer deposit was a fifth lower than a year ago and at the same time, first time buyer purchase prices have stayed fairly stable.
The average first time buyer mortgage has risen 2.9% over the last year to £119,743, while prices have stayed flat but deposits have fallen. The market is indicating signs at first time buyer level of remaining stable and prices not spiralling out of control.
‘The bottom of the market continues to recover, even as activity further up the price bands is beginning to show signs of slowing down. Lenders have been more willing to lend to higher loan-to-value borrowers. Help to Buy has boosted confidence and with it demand among first timers who have been carefully saving up for their deposit,’ said David Brown, commercial director of LSL Property Services.
But he believes that the new loan to income caps could have a stifling effect on the first time buyer market. ‘They have understandably been designed to prevent too much risky lending to borrowers with smaller deposits, but they need careful interpretation to ensure they do not cut good buyers with realistic and very affordable borrowing expectations out of the market,’ he explained.
‘MMR regulations already stress test borrowers’ ability to withstand a base rate rise. The further regulation could sap the energy at the bottom of the market,’ he added.
The data also shows that in June 2014, some 93% of tenants registered with Your Move and Reeds Rains wanted to become home owners and overall the proportion of registered tenants expecting to buy in the near future is increasing. In June 2013, only 12% of tenants expected to buy in the next 12 months. A year later, that proportion has risen to 17%.
A further 38% of tenants surveyed in June 2014 believe they will be able to buy within the next five years and 29% expect to buy at some point in the future.
But the number of tenants who believe they will never be able to afford to buy is also increasing. Some 14% were…