Property Price Increases Forcing FTBs To Use Help To Buy

Although many experts have predicted that house prices could be adversely affected by Brexit outcomes, in the past five years property prices have skyrocketed by up to 60%.

A recent report carried out by property management firm, Apropos, focused their findings on the average property increases since 2013 across the UK’s major cities and towns.

Overall, first-time buyers (FTBs) in England are now paying 40.6% more for a similar, if not identical property that was purchased in 2013.

The current FTBs in the Bristol region are now being forced to pay 59% more than five years ago. Despite a flat and receding London market in recent months, prices are still 53% higher than they were in 2013.

Manchester (54%), Coventry (49%) and Nottingham (48.6%) have all experienced considerable property increases in this time, making things increasingly difficult for a first-time buyer trying to gain a foothold on the property ladder.

Whilst the gas and oil industry continue to decline in Aberdeen, property prices have also shrunk in line with the economic situation by 5.4%. Overall, the North-East has been restricted to the tightest increases (13%).

Whilst these increases may be positive for home owners who are enjoying the additional equity, it poses a clear dilemma for FTBs and the options they have for acquiring property. According to the Office of National Statistics, the median average salary in 2013 was £26,176; this figure increased to £28,248 in 2018 and represents an average median wage increase of 7.6%.

A buyer in this time would need to save £25,562 for a 20% deposit on the average property in Manchester which was worth £127,814. For a similar deposit in 2018, the average Manchester house price of £236,693 would mean a buyer would need to save £47,338.

With lenders looking to offer mortgages worth no more than six times the value of their home, Manchester buyers will struggle on the average wage as the average house is worth 8.4 times the amount of their annual salary.

In comparison, the average price of a Manchester property in 2013 was only worth 4.8 times a person’s average salary.

It is unsurprising that so many FTBs are being forced into using Help to Buy schemes being offered on new build properties as the average individual, on an average wage can no longer afford to buy an average home on their own.

Since the scheme’s launch in April 2013, 195,219 residential properties have been bought using equity loans up to 30 September 2018 on the Help to Buy scheme.

50,302 residential property purchases were made using the Help to Buy: Equity loan scheme in England last year. This equates to almost 1,000 property completions using this scheme per week and represents an increase of 13% on the figures from 2017.

In total, 41,076 of the housing completions made using the Help to Buy: Equity Loan scheme were from first-time buyers and equates to a 14% increase in the scheme’s uptake from a year earlier.

David Alexander, managing director of Apropos, said: “These figures highlight the enormous differences in average first-time buyer prices across the UK, with some places such as Bristol, Manchester and London all increasing between 50%-60% in a five-year period.

“What this tells us is that demand remains strong among first-time buyers even in the face of large increases in average prices.

“The spread of price increases across the country would indicate that confidence in property ownership remains high and many first-time buyers are committed to home ownership.”

Mark Hayward, chief executive of NAEA Propertymark, said: “Our research shows first-time buyers account for over 25% of the market, which is encouraging as it promotes activity upwards in the chain.

“Caveat this with the huge success of Help to Buy which whilst encouraging in terms of new-builds does not feed into the general market place but into a ‘cul-de-sac’ with no assistance to upward activity.”

Have you seen more FTBs using Help to Buy schemes? Have property prices reached an affordability breaking point?


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