Under embargo until 00:01 Friday 28th November 2014

November 2014

 

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First-time buyer demand stabilising

• October sees 26,500 first-time buyer completions – up 1% compared to 26,300 a year ago

• Average first-time buyer purchase price climbs 4.1% year-on-year to £152,684 in October

• Lack of understanding over new regulation: Four in ten buyers think LTI caps mean it is now more difficult to get a mortgage than six months ago

The number of first-time buyer house completions stalled in October, as demand began to ebb away at the bottom of the market, according to the latest First Time Buyer Opinion Barometer from Your Move and Reeds Rains.

There were 26,500 first-time buyer completions in October 2014, 0.8% more than a year ago, and 1.1% fewer compared to 26,800 in September. First-time buyer transactions have now fallen back 12.3% over the last three months, however the rate of slowdown is beginning to ease. A monthly slowdown of 1.1% between September and October compares to falls of 7.3% between August and September and 4.3% between July and August.

The average purchase price for a first-time buyer property rose 4.1% year-on-year to reach £152,684 in October 2014. Over the same period, the average first-time buyer deposit has fallen 6.0% - boosted by a greater variety of options for higher LTV borrowers – and now sits at £26,046, compared to £27,719 a year ago. The size of an average first-time buyer mortgage climbed 6.5% year-on-year in October to £126,638.

Monthly Transactions

Average Purchase Price Average Deposit Average Mortgage

October 2014 26,500 £152,684 £26,046 £126,638

September 2014 26,800 £151,806 £26,282 £125,524

1 month change -1.1% +0.6% -0.9% +0.9%

3 month change -12.3% +0.6% +0.4% +0.6%

1 year change +0.8% +4.1% -6.0% +6.5%

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David Newnes, director of estate agents Your Move and Reeds Rains, said: “Help to Buy reinvigorated the bottom of the market by adding that vital ingredient – confidence. But other factors have pulled this back over the last few months: confusion over a base rate rise, global uncertainty, falling house prices and an inadequate supply of affordable homes have all contributed to a hesitation among first-timers about whether now is the right time for them to buy. “Stalling first-time buyer completions is down to dipping demand, rather than mortgages becoming less accessible. Compared to a year ago, there are now options for first-time buyers unable to save up large deposits to get on the ladder. Cheaper rates have also played a part, by allowing first-time buyers to lock into cheaper monthly repayments.”

THE LTI CAP EFFECT

There is still a lack of understanding about loan-to-income caps and their potential effects on the mortgage application process. When asked about their understanding of the caps, seven out of ten (67%) first-time buyers said they have never heard of them, while a further sixth (14%) answered that they have heard of them but don’t understand what they are. Just one in five (20%) first-time buyers have heard of loan-to-income caps and understand what they are.

Additionally, a large proportion (42%) of first-time buyers believe loan-to-income caps have made it more difficult to get a mortgage compared to six months ago. A further 48% are unsure of the effects of the caps, and only one in ten (10%) believe the introduction of loan-to-income caps has had no effect on how difficult it is to get a mortgage.

The latest e.surv Mortgage Monitor showed a drop off in higher LTV lending in October. Lending to borrowers with a deposit of 15% or less of the total value of their property constituted just 14.9% of all house purchase borrowers in October, the lowest percentage in six months. Their share of the market had been stable from June to September, fluctuating very slightly between 17.4% and 17.8%. David Newnes, director of estate agents Your Move and Reeds Rains, said: “Loan-to-income caps are the latest wave of regulation to hit the mortgage market, following the tide-change brought in by the Mortgage Market Review earlier this year. Although they have were intended as a preventative measure to restrict lending to those on tighter incomes, they do have in-built flexibility – and even the Bank of England expected their initial impact to be limited. “However, our research shows that loan-to-income caps are still widely misunderstood, and four in ten first-timers believe they have made it more difficult to get a mortgage compared to six months ago. The regulation may have been brought in as a safeguard for the future, but it has had an immediate effect in dampening demand, and needs to be explained better.” THE ASPIRATION GAP

Despite the recent fall in first-time buyer demand, more people believe they will be able to buy at some point in the future.

A fifth (20%) of tenants expect to be able to buy by the end of 2014/2015, compared to just 6% in December 2013. A further two fifths (40%) believe they will be able to buy within the next five years. Under one in three tenants (28%) believe they will buy at some point in the future, but cannot pinpoint when. Only 9% of tenants surveyed in October think they will never be able to afford to buy, three percentage points lower compared to December 2013 (12%).

 

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In October 2014, 93% of tenants registered with Your Move and Reeds Rains wanted to become homeowners.

FINANCIAL HELP FOR FIRST-TIME BUYERS Four in ten first-time buyers (41%) surveyed in October had only recently been in a position to be able to buy. Other popular reasons for getting onto the housing ladder were the desire to settle down (24%) and the desire to own a home with their partner (28%). Just 6% of first-timers chose to buy as an investment for the future – compared to 11% in December 2013 – reflecting the slowdown in house price growth over the last year. Over half of first-time buyers (54%) are receiving some kind of financial help with their purchase. A third (36%) received support from their relatives to put together a deposit; 11% used money from an inheritance and 5% made use of government schemes like Help to Buy. However, the proportion of first-time buyers self-financing their purchase (46%) has risen slightly compared to December 2013 (44%).

David Newnes, director of estate agents Your Move and Reeds Rains, said: “Even though slightly more first-timers are self-financing than a year ago, over half of purchases are still reliant on outside financial help – by and large mostly with putting together a deposit. This is putting pressure on parents and relatives of first-timers, many of whom have seen their own savings eroded since the recession, with inflation consistently tracking above the base rate. Until more first-

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timers are able to self-finance, it is important to keep the support mechanism of Help to Buy in place to provide a financial leg-up to those buyers who can’t rely on family and friends.” REGIONAL DIFFERENCES

In London and the South East, the average first-time buyer was 31 years old and earning £44,800 in October, whereas in the rest of the UK, the average first-time buyer was 30 years old and earning £33,000.

First-time buyers in the capital paid an average of £270,881 for their property in the three months to October 2014, compared to £145,992 across the UK. The average first-time buyer deposit in London was £73,913, compared to an average of £26,711 across the UK. David Newnes, director of estate agents Your Move and Reeds Rains, said: “The affordable housing conundrum is even more of problem in London, where the lack of affordable housing stock is artificially inflating first-time buyer purchase prices. As a result, London first-time buyers have to wait longer to get on the housing ladder. Mansion tax is high up on the agenda for London – but it is important that the other end of the buyer spectrum doesn’t get forgotten. First-time buyers have propped up activity over the last year, and they require continued support, otherwise a large driver of activity in the capital could fall away.”

SEE FULL REGIONAL MAP OVERLEAF

 

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   Heat map of first-time buyer purchase prices

(Three months to October 2014)*  

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

Region Average Purchase Price Average deposit Average mortgage Number of FTBs*

London £270,881 £73,913 £196,968 12,600 South East £198,096 £41,649 £156,447 16,300 South West £169,736 £44,016 £125,720 6,700

East of England £147,786 £23,917 £123,869 2,900 Grand Total (UK) £145,992 £26,711 £119,281 82,400

Scotland £133,430 £23,618 £109,813 7,800 West Midlands £129,506 £16,922 £112,585 6,600 East Midlands £126,383 £19,252 £107,131 5,800

Yorkshire & Humber £121,089 £17,119 £103,970 6,600 North West £121,039 £18,089 £102,950 8,200 North East £109,639 £23,761 £85,878 3,500

Wales £106,487 £15,215 £91,272 3,400 Northern Ireland £104,383 £15,902 £88,481 2,000

  £220,000 +

  £190,000 - £220,000

  £160,000 - £190,000

  £130,000 - £160,000

  £100,000 - £130,000

  Less than £100,000

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* This is the total number of FTBs in the three months to October 2014. Based on CML regional data (released 27th August 2014) on the number of FTBs in Q2 – grossed up to reflect growth in FTBs recorded by Your Move and Reeds Rains between Q2 2014 and the three months to October 2014.

Examples of First-Time Buyer Properties**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Scotland

Three bedroom house

Auchterarder

£84,995

North West

Two bedroom house

Burnley

£35,000

Northern Ireland

Three bedroom detached house

Carrickfergus

£44,950

West Midlands

Two bedroom flat

Birmingham

£41,250

Wales

Two bedroom semi-detached house

Rhyl

£50,000

South West

One bedroom flat

Bristol

£120,000

North East

Two bedroom house

Bishop Auckland

£45,000

Yorkshire & Humber

One bedroom apartment

Hull

£36,000

East Midlands

Two bedroom apartment

Derby

£42,500

East Anglia

Two bedroom house

Lowestoft

£60,000

London

One bedroom flat

Orchard Grove

£106,000

South East  

Studio flat

Havant

£77,000

 

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** Properties on the market with either Reeds Rains or Your Move estate agents at the time of going to press.

– ENDS –

Press contacts Tora Turton, The Wriglesworth Consultancy, v.turton@wriglesworth.com, 020 7427 1445

Adam Kirby, The Wriglesworth Consultancy, a.kirby@wriglesworth.com, 020 7427 1440

Methodology LSL uses the extensive monthly data from registered first-time buyers in its estate agency brands Your Move and Reeds Rains to update the CML’s first-time buyer data before the CML’s RMS data is published. The term ‘first-time buyer’ is here denoted by the purpose of a buyer’s registration, rather than their LTV. LSL LTV data has been applied to CML price purchase data to calculate deposit and affordability information. Sentiment and salary data are derived from a survey conducted by LSL. The figures are not mix or seasonally adjusted, and are subject to revision as more data becomes available.

This First Time Buyer Opinion Barometer has been prepared by The Wriglesworth Consultancy for LSL Property Services. It has been compiled using information extracted from LSL’s management information. The copyright and all other intellectual property rights in the First Time Buyer Opinion Barometer belong to LSL. Reproduction in whole or part is not permitted unless an acknowledgement to LSL as the source is included. No modification is permitted without LSL’s prior written consent.

Whilst care is taken in the compilation of the First Time Buyer Opinion Barometer, no representation or assurances are made as to its accuracy or completeness. LSL reserves the right to vary the methodology and to edit or discontinue the First Time Buyer Opinion Barometer in whole or in part at any time.