First time buyer market sees positive growth

Recent figures show that in November 2014, prices paid by first time purchasers were 11.0% higher on average than in November 2013. For existing property owners, prices increased by around 9.5% for the same period.

Referring to the figures below published by LSL Property Services, the average sum paid for a first property in the UK has increased by around 8%. On average, this equates to an additional £9,000 on the average house in the last year.

Whereas the number of first time buyer sales has risen by a quarter, the average house price has also crept up. Looking at the comparison map it shows a notable difference in the average price paid by first time buyers across the UK.

Halifax recently reported a rise of 20% in the number of first time buyers. They estimated that 326,500 people bought their first property last year and this was the highest total since 2007, at the start of the financial crisis. Halifax reports that first time buyer deposits, on average, in 2013 were £31,582 and in 2014 were £29,218. However, Nationwide reported a drop in mortgage lending, with evidence suggesting that the housing market is beginning to slow down. They lent some £5.8 billion to homeowners in the three months to the end of June 2014, compared with £6.4 billion in the same period the previous year.

With government backed schemes such as Help to Buy, house builders offering deposit paid on new build plots and mortgage lenders offering discounted products, first time buyers can now climb onto the property ladder without having to visit the bank of mum and dad. However the average price paid by first time buyers is around 11% higher. Surprising results given rising house prices?

There is also the Mortgage Guarantee Scheme, which is available to support purchasers who have struggled to raise a sizeable deposit. It’s similar to a traditional mortgage, except the government guarantees a portion of the loan to an affiliated lender. A minimum of 5% of the property value as deposit is required.

The Office of National Statistics figures reveal:

  • UK house prices increased by 10.0% in the year to November 2014, down from 10.4% in the year to October 2014.
  • House price annual inflation was 10.4% in England, 3.1% in Wales, 4.4% in Scotland and 11.7% in Northern Ireland.
  • House prices continue to increase strongly across the majority of the UK, with prices in London again showing the highest growth.
  • Annual house price increases in England were driven by an annual increase in London of 15.3% and to a lesser extent increases in the East (11.9%) and the South East (10.8%).
  • Excluding London and the South East, UK house prices increased by 7.1% in the 12 months to November 2014.
  • On a seasonally adjusted basis, average house prices increased by 0.2% between October and November 2014.
  • In November 2014, prices paid by first-time buyers were 11.0% higher on average than in November 2013. For owner-occupiers (existing owners), prices increased by 9.5% for the same period.

Has your practice seen an increase in first time purchaser activity? Are the above figures reflective of first time buyer clients seen by your firm?

Another recent study revealed prices in London are now on average 42% higher than before the recession. Vendors’ asking prices in Cambridgeshire, Berkshire, Surrey and the capital have made the strongest returns since the financial crisis hit, according to the figures from property website Rightmove. The average asking price in County Durham is £114,554. In Teesside and West Yorkshire, asking prices are still around 9.1% below 2008 levels. First time buyers are also seeing an increasing proportion of their income going on mortgage payments. The proportion is likely to increase again in the coming months if interest rates start to climb

Miles Shipside, director of Rightmove, said: “While at a high level the South has out-performed the North, being able to dig underneath that courtesy of the millions of properties advertised on Rightmove since 2001 shows a really varied county versus county performance.”

Has your practice adopted a new ‘forward thinking approach’ in terms of attracting first time purchasers?

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