According to the latest report from estate agent Your Move & Reeds Rains, first-time buyers are paying record amounts for their first home purchase, despite the market’s weakening in anticipation of the EU referendum.
The report shows that average first-time buyer house price increased by more than £23,000 in the last twelve months, making current average prices the highest ever recorded. May saw a 15% year on year increase in average house price for first-time buyers to £173,282, from £149,645 in May 2015. There was a 2.7% month-on-month increase from £168,656 in April.
First-time buyer purchases totalled 24,900 in May, 0.8% lower than April’s 25,100. Market indications suggest that the slight decrease may be due to lack of supply in the market ahead of the EU referendum. Figures show that the first-time buyer market remains strong, with first-time purchases up 5.1% year on year, and 13.2% from February 2016.
Across the wider market, however, house prices fell as the market geared up for the June 23 EU referendum. The latest Your Move House Price Index shows that prices fell by 0.4% month on month in England and Wales, in May.
UK regional figures show that first-time buyer house price is now more than £150,000 in the East of England (£161,088), the South West (£165,068) and the South East (£229,828).
First-time house prices remain highest in London. First-time buyers in the capital have to pay an average of £338,074 to get on the housing ladder, having to make an average deposit of £84,138, and take out a mortgage of £253,936 on the average. London first-time purchases defied these high costs to see a total of 11,700 completed transactions between March and May this year.
First-time buyers will find the North East and Northern Ireland the cheapest areas to buy a home. The North East offers the cheapest first-time house price averages at just £106,022, less than 0.33 of the cost of the average price paid in London. These cheaper costs allowed 3,300 first-timers to purchase properties in this region between March and May this year.
The UK average mortgage rate for first-time buyers fell to 3.08% in May (a record low), following a fall of 0.37% over the past year. The UK-wide average first-time buyer deposit is currently £27,669, up 12.8% from £24,523 a year ago.
Figures from the National Association of Estate Agents show that buyer demand slowed in May, in the lead up to the June EU referendum. The number of registered house seekers fell to a three-year low.
Nationwide’s chief economist, Robert Gardner, is of the opinion that it is still early to conclude how the UK housing market will react to Brexit.
He also pointed to the April stamp duty hike which saw a rush of buy-to-let purchases in March, stating that it would be difficult to determine how much of the likely fall in transactions the new rule may be responsible for.
Figures from Nationwide show that average UK house price still recorded a month-on-month increase of 0.2 %, the same growth rate as in May. There was 5.1% year-on-year increase to £204,238, up 4.7% last month
These statistics may suggest that the lack of house supply will continue to be a key driving factor in the UK property market, as house price increased despite the overall drop in demand in the run up to the Brexit poll.
Experts warn that the demand vs supply imbalance may continue even longer, as the market is expected to see less new-build homes for a period. This also means that house price may not reach the predicted record lows.
Adrian Gill, director of estate agents Your Move and Reeds Rains, comments: “May saw a crunch in the number of homeowners putting up a ‘for sale’ sign as many sellers held back to see the result of the EU referendum. But Brexit worries haven’t dented first-time buyers’ appetite to own their own home. Many still want to capitalise on the record low mortgage rates available at the moment which mean that monthly mortgage repayments are increasingly affordable.
The Brexit result won’t change the fact that huge numbers of aspiring first-timers want to buy a home, and lots won’t want to wait out the 2 years until the renegotiations over the EU have been completed. In the short-term, the wider market wobbles may benefit first-timers, giving them the leverage to negotiate harder and get a good deal on purchase price. Canny first-timers will use any Brexit-lull as a chance to snap up a good deal and get on the housing ladder.
New builds still have a part to play in absorbing first-time buyer demand. But the biggest and most immediate improvement would come from stimulating more activity from the top to the tail of the housing market. Just as many first-timers can’t find the one bed flats or two bed houses they are typically looking to buy, some second steppers can’t find the three bed homes they may want to move into to suit their growing families. Even experienced buyers looking to downsize and free-up their larger family homes are struggling to find suitable properties for sale. Housing chains are clogged up.
The government should support our sellers, making it cheaper to move house and adding much needed energy back into the market. Houses for sale are getting snapped up quickly in this climate but many more sellers are needed.
Nationwide’s Gardner echoed: “Even if demand does soften a little, there’s going to be underlying demand. There are so few properties on the market.”
Gardner also suggested that the weakening pound would offer attractive discounts to international investors – who are the main property investors in London – and keep house price at a respectable price.
Estate agent Countrywide’s chief economist, Fionnuala Earley said that market reaction to the vote has so far been mixed; some foreign investors increased their offers on properties, some first-time buyers quickly completed purchases while some others decided to wait out the first few months after the poll before taking any actions.
“It is too early to know what the full impact of the vote to leave the EU will be on the housing market and a clearer picture will emerge in the coming months”, she added.