Property Market Showing Some Signs of Shifting in Favour of First-Time Buyers

property market for first time buyers

The Office for National Statistics (ONS) has announced that a +4.1% rise in housing prices was seen in 2017 up to March.  This is in contrast to a continuing lowering of house costs due to inflation since June, 2016.  At that time, the yearly rate of growth was +9.4%.

In addition, Halifax’s house pricing index noted for last month actually had a more difficult time, with a reported biggest dip in four years of approximately +3.8%.

The ONS further reported that the typical property amounts according to the ONS are just short of £216,000.  This is lower by £1,000 since last March, yet up by £9,000 since last month.  Going month to month, selling prices were down in every English area with the exception of the Humber, Yorkshire, and the East Midland, where no difference was found.

A fall from £479,000 to £472,000 occurred in London in between February and March.  This represented the second biggest difference of any English area except the North East, with London at  -1.5% and the North East at -1.7%, a slightly smaller margin.  The housing market in the City of London area showed up even worse.  The City of London itself ranked second from bottom of all local authority jurisdictions at -6.4%, despite prices being still at the top with on average £743,781.

Finding the market for housing generally slow, Samuel Tombs of Pantheon Macroeconomics said that it has “its softest patch for several years,” adding that the outlook in London is at a crawl.

“Looking ahead,” Tombs added,  “it is very hard to see growth in central London prices recovering, given that valuations look stretched, the financial sector is facing an uncertain post-Brexit future and volatility in sterling is undermining property’s safe-haven appeal for overseas investors.

“Across the rest of the UK, house price growth looks set to remain dampened by sluggish growth in wages and the loan-to-income limits imposed on lenders,” he posited.

But because there is an ongoing shortfall in the area of new housing, it is this fact that likely will stop costs from taking too great of a dip.  Unfortunately, it is the smaller than the typical rise in pricing that will not provide the needed impetus for developers to act.  Unless there is a big alteration somewhere, housing prices will likely stagnate.

Although movers and developers are hampered by this situation, it is the first-time purchaser thinking positively that rising salaries may catch up to lower housing costs in a way unseen in quite awhile.

But while average weekly earnings went up a bit, at only 2.4%, or 2.1% without bonus awards included, once these numbers are bumped up against inflation rates, the differences were just +0.1% and -0.2%, respectively.

The average first-time purchaser that signed for a mortgage, per the Council of Mortgage Lenders (CML),  in March 2017, was loaned 3.53 times their annual wages which rose from 3.46 last year at this time in 2016.  This meant that the typical loan-to-value (LTV) came in at 82.2,% of a loan valued at £133,500.  In February 2017, the average LTV went down from 83.9% compared to March 2016 when it was at 82.6%.

One possibility to benefit those first-time buyers that go beyond the slowdown in rising prices is that private landlords are not buying properties as before.  “Buy-to-let” (BTL) mortgages are down since the stamp duty tax started in April 2016.  In fact, they were at 71,100 in 2017 up to March, as opposed to 142,000 in the year prior, 2016.

However, given the BTL’s huge surge borrowing in March 2017 prior to the changes to the stamp duty, things could be misleading.  But during an even smaller time frame, awarding loans to those purchasing for the first time was ahead of those given to landlords.  Between February and March 2017, borrowing money to first-time buyers went up by 29% loan-to-value, as opposed to just 4% in landlord lending.

“The relatively sluggish activity among home-movers stands in contrast to the growth in first-time buyer and remortgage activity,” according to CML’s Paul Smee,  “but in aggregate the market is showing broadly the levels of activity we expected.  As we head into the summer, we expect a continuation of these trends, with both first-time buyer and remortgage lending expected to maintain momentum in the light of the very attractive deals currently available,” he continued.

And as for those first-time buyers, there are other indications beyond wages that the housing market may slowly be turning in a positive direction for them.  Low mortgage rates, which have set some never-before-seen-lows; slow price growth; and fewer challenges from BTL are good things for those trying to get a leg up on the road to home ownership.  If new building rises, this would bode well, too.

  • Elise Dopson is a freelance writer and blogger. She shares tips on how start, market and run a successful freelance business on her blog. 📧 Contact: elise@newsanyway.com

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