The new data shows that the volume of first time buyer transactions fell sharply from 79,900 in 2014 Q4 and the lowest quarterly total since Q1 2013 – when 51,000 new buyers joined the property ladder.
In the latest figures for March 2015, the monthly total for UK first-time buyer transactions now stands at 23,300. While higher than the often quiet months of January and February (up 24.6% on February’s total) this still represents fewer new buyers than the same month a year ago – down 3.7% since March 2014.
The news comes despite a 3.64% average mortgage rate for first-time buyers in March – the lowest in over five years – and an average loan to value ratio (LTV) for March’s first-time buyers of 83.5%, the highest in a year (since April 2014).
Cheaper mortgage rates have also supported lower monthly mortgage repayments as a proportion of first-time buyers’ income. In March the average FTB dispensed 19.9% of their gross income on repayments against their new mortgage, compared to 20.1% in February and 21.9% of income in March 2014.
Adrian Gill, director of estate agents Your Move and Reeds Rains, comments: “Cheaper mortgages and a steadier property market should be boosting first-time buyers. Enthusiasm for the idea of homeownership is as strong as ever and it’s a great time to get on the ladder according to these headline fundamentals. Yet for many thousands of would-be new buyers there is still a very real difficulty in matching their personal finances to a home they can afford.
“Some might also point to election uncertainty and that could be a partial brake. However, the real bottle-neck is a much more serious and longer-term problem. First-time buyer numbers have flat-lined for two years because a lack of new homes is catching up with the property market. It’s not the election itself that matters most – it’s the next five years and the decades after that which will count. Even now, with the extra support of record low mortgage rates and Help to Buy, the property ladder seems to be missing several rungs. Politicians need to get serious about building more homes.”
House prices and first time buyers
New buyers paid less on average for their first home in March than in February, with the average transaction value down 1.1% on a monthly basis, and now 3.3% lower than at the start of 2015. However, this leaves first-time buyer home prices up 2.1% on a twelve month basis, compared to March 2014.
Moreover, in the first quarter as a whole, the price paid by first-time buyers has risen to its highest in four years. In Q1 2015 the average FTB price stood at £152,681, up from £149,836 in the last quarter of 2014.
Adrian Gill continues: “Wages are now beating inflation, and that’s boosting household finances in a way not seen for half a decade. On the ground, there is a little more optimism in the air.
“But property prices are still rising faster. A wider slowdown in the property purchase market has helped to give a little breathing room for first-time buyers – and low mortgage rates are keeping monthly payments more affordable. However, as long as prices keep rising faster than wages the fundamentals will keep being squeezed, and buying a home will need ever more artificial support. Mortgage schemes like Help to Buy are welcome but will always be a temporary solution. To carry on that success, the UK’s next generation of homeowners needs faster economic progress plus far more new homes every year, so that wages can start to rise faster than property prices.”
Regional differences
London has seen large increases in first-time home prices, while other parts of the UK have experienced a correction.
The average purchase price for a first-time property in London rose to £304,205 in the first quarter of the year from £283,595 in the last quarter of 2014, while the price in the South East region grew to £205,941 in Q1 2015 from £199,895 in Q4 last year. The neighbouring Eastern region experienced even stronger growth, with the average price of a home rising to £172,847 in Q1 2015 from £159,218 in Q4 2014.
In other parts of the UK, however, FTB property prices dipped somewhat. Wales saw the average first-time buyer pay £107,576 in Q1, down from £118,382 in the final quarter of 2014, while the average price for a first-time property in the South West declined to £153,677 in Q1 from £167,081 in Q4.
This disparity between south-eastern regions near London and other parts of the UK is reflected in differences in the average deposit between the regions. On average, Londoners put down a deposit of £67,103 – more than five times the size of the average first-time buyer deposit in Northern Ireland (£12,522). Equally the average deposit put down by first-time buyers on a home in the East of England was over double that put down by equivalent buyers in the South West, Wales and Yorkshire & the Humber.
Adrian Gill concludes: “Beyond the obvious pre-eminence of London, a new trend is emerging. Prices in the East of England seem to be pulling away from other parts of the UK and joining London and the South East as very expensive places to live. A number of factors could be causing this, notably among them the growth of Cambridge City as a tech and Life Sciences centre, attracting young professionals with more money than other first-time buyers. However – unless new homes can be built across the UK, other regions will soon start to join the list too.”
