Strongest summer on record for FTBs as sales pick up 25% post-election

  • August sees 30,200 first-time buyer sales – an increase of more than a quarter (27.4%) compared to May
  • Transaction levels hold steady on July at a post-recession record and the highest total since August 2007
  • New changes make the last three months the strongest summer in eight years, with almost 90,000 sales in total
  • But rising costs may spell trouble for first-time buyers, as the average deposit rises 9% since May 2015

The number of first-time buyer (FTB) sales in August leapt by over a quarter compared to May, according to the latest First-Time Buyer Tracker from Your Move and Reeds Rains.

August experienced 30,200 completed first-time buyer transactions, compared to 23,700 in May – the month of the General Election. This represents an increase of 27.4% on a three-month basis and means that 6,500 more first-time buyers completed property transactions in August than in May.

On a monthly basis, first-time buyer transactions matched July’s total of 30,200 sales, meaning that completed transactions are still at their highest level since August 2007, a post-recession high for the second month running. This makes the June to August period the strongest summer in eight years, with 89,800 transactions being completed by first-time buyers. By contrast, during the same summer period last year only 84,900 sales were completed.

Adrian Gill, Director of estate agents Your Move and Reeds Rains, comments: “An end-of-summer surge in first-time buyer activity is in full swing. With May’s General Election a distant memory, many first-time buyers are basking in the political stability that comes with a majority Government and a fixed-term Parliament. They are also benefitting from a British economy that is beginning to roar. As real-term wages rise and job security is increasingly taken as a given, renters are feeling, in ever larger numbers, that they have ability to overcome cost caveats and turn their property-owning dreams into reality.”

Deposit cost driven up by rising wages

Despite their strong summer, first-time buyers face a range of rising costs associated with purchasing property. Between August and May of this year, the average first-time buyer deposit grew by 9% to £26,741. As a result, deposit costs jumped from consuming 63.7% of an average first-time buyer’s income in May to 68.5% in August – a rise of 4.8 percentage points.

In addition, the average price of a first-time buyer property stood at £153,999 in August – an increase of 2.9% since May, and up 1.4% in just one month since July.

The average mortgage rate continues to fall, but an increasingly slow pace. In August, the average rate stood at 3.35%. While the figure represents a 0.85 percentage point decrease on August 2014 and a 0.1 percentage point fall on May 2015, it represents only a negligible 0.08 percentage point decrease on last month’s average rate.

However, the average loan to value ratio is holding steady, with August’s LTV of 82.6% up 0.4 percentage points from August 2014’s figure of 82.2%. Alongside this, data from the latest Mortgage Monitor from e.surv revealed that the number of high LTV loans in August increased by 7.5% compared to last month and by 13.7% compared to May.

Adrian Gill continues: “Rising deposit costs and average house prices – while hardly a first-time buyer dream – are encouraging economic signs. They point to rising real-terms pay and overall consumer confidence. Similarly, first-time buyers may grumble about the Bank of England sending out increasingly firm signals that a rate rise is on the horizon. But we are not there yet – the average mortgage rate is continuing to fall, albeit at a more cautious pace than in recent months – and the number of high LTV loans available is still on an upward trajectory. This means it is an opportune time for first-time buyers to bid farewell to renting and get a place of their own.”

Regional differences

London is the most expensive place for first-time buyers, with average first-time buyer house prices reaching £302,010 in the three months to August 2015. The South East is the second most expensive hot-spot for those putting their first foot on the property ladder. The average house price there over the same period was £226,383. Nationally, the average price for a first home stood at £155,652 in the three months to July 2015. The North East and Northern Ireland rank as the least expensive regions for first-time buyer properties, with average prices standing at £111,237 and £91,047 respectively.

On average, Londoners put down by far the largest deposit of any region in the three months to July 2015, paying out £73,505 – more than five times the size of the average first-time buyer deposit in the Northern Ireland (£12,897). The second-largest deposits are paid by first-time buyers in the South East. Buyers there paid an average of £51,456 to secure their first home in the three months to July 2015 – almost double the national average (£26,545).

Adrian Gill concludes: “London and the South East have always been Britain’s property powerhouses. London attracts massive global investment – alongside a fair bit of celebrity caché – so it’s hardly surprising that the capital’s property market is steaming ahead of the rest of the UK’s. In addition, with the South East rapidly becoming London’s commuter belt – offering efficient transport links with the capital combined with a more laid back, suburban way of life – house prices there are being pushed up by young professionals seeking to buy for the first time.

“But it’s not all about these two regions. As deposit costs in London and the South East sprint away from the rest of the UK, many first-time buyers may decide that, whatever the allures of the UK’s biggest city, it’s simply not worth paying out so much capital at once for the privilege of living in or near it. This leaves an opening for other regions, where deposit costs tend to be lower, to attract first-time buyers and create property hot-spots of their own.”

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