The number of completed first-time buyer transactions increased to 31,300 in November, according to the latest First-time Buyer Tracker from Your Move & Reeds Rains.
This represents an annual increase of 23.7% – or 6,000 additional transactions – compared to November 2014, when the total number of first-time buyer sales stood at 25,300. November 2015’s monthly transactions figure is also the highest since August 2007 – before the economic downturn began – when the number of completed transactions for first-time buyers previously stood at 35,300.
The Tracker found that November 2015 also saw first-time buyer transaction figures perform strongly on a three-month and monthly basis. Between August and November the number of people successfully taking their first step onto the property ladder grew by 17.2% – or 4,600. Similarly, the number of completed transactions in November rose by 4.7% month-on-month, representing 1,400 more first-time buyers than the previous month.
Adrian Gill, director of estate agents Your Move and Reeds Rains, said: “First-time buyer numbers have enjoyed a strong 12 months. Despite a shaky start at the beginning of 2015 – as sluggish real-terms pay rises and worries about the health of the economy held back some – first-time buyers recovered their confidence in time for Christmas. They aren’t yet surfing on the rising tide of the British property market, but they have learnt to swim to catch up.
“There are a number of factors behind these solid figures. The effect of government stimulus packages, such as the Help to Buy scheme, is one factor, while the lure of lower interest, higher LTV lending is another. What is perhaps a more important factor however is that over 2015 first-time buyers have become increasingly cost-savvy and determined when it comes to finding their ideal home. The days are over when those who wanted to get a foot on the ladder would take a look in an estate agent’s window, before giving up due to property price panic. Instead, first-time buyers are now doing their research – weeding out the best value-for-money properties in their desired area – and driving a hard bargain to get what they want. They deserve to end the year with the quiet confidence that their determination has paid off.”
The costs for buyers of owning their first home have lightened over the past 12 months. The average price at which buyers are purchasing their first home fell from £155,745 in November 2014 to £148,385 in November 2015, representing an annual price drop of 4.7% – or £7,360. November 2015 also marked the first time that the average purchase price for a first-time buyer home has fallen, on an annual basis, since March 2013.
This purchase price drop for first-time buyer homes stands in contrast to the annual trend for the overall property market. The latest LSL Acadata House Price Index reveals that, across England and Wales, the average value of all property rose by 6.0% – or £16,446 – and now stands at £290,640.
Deposit costs have also fallen. In November 2015 the average deposit for someone looking to buy their first home stood at £24,598 – a drop of 4.2%, or £1,097, from November 2014, when the figure stood at £25,665. Alongside this, the proportion of an average first-time buyer’s income which is consumed by the deposit has dropped – from 67.3% in November 2014 to 62.5% a year later.
First-time buyers are experiencing a largely brighter picture when it comes to mortgages. The average loan-to value rate on a first-time buyer mortgage has climbed between November 2014 and November 2015 – from 82.8% to 83.4% – meaning that first-time buyers need less up-front capital to make their dreams of homeownership a reality. Over the same period, the total number of high LTV loans has jumped by 43.7%, according to the latest Mortgage Monitor from e.surv.
However, despite the average mortgage rate for first-time buyers falling between November 2014 and November 2015 from 3.92% to 3.37%, there have been more recent signs that mortgage rates for FTBs are beginning to tick up. November 2015’s average mortgage rate represents a 0.02% percentage point increase on August and a 0.03 percentage point increase on October, meaning that first-time buyers will be, on average, shelling out more – albeit a small amount more – to pay their monthly mortgage interest.
Gill said: “A mixture of luck and pluck have seen costs fall across the board for first-time buyers this year. Rising real-terms wages as economic conditions improve have certainly been instrumental in helping those setting foot onto the property ladder devote less of their salary to mortgage payments and deposit costs. These were obstacles that were previously holding many back from taking the plunge and buying their first home. Equally, a more fluid mortgage market has given many first-time buyers the chance to own a home off the back of a mortgage that two or three years ago they could only dream of obtaining.
“But first-time buyers are not just passive recipients of success – they have played their part in bringing their homeownership costs down. The sizeable fall in the average purchase price for a first-time buyer property is largely due to property hunters toughening up and driving hard bargains to get the home they want for the price they want. The question going into 2016 will be whether first-time buyers can continue playing hard ball with a smaller housing stock, as well as contend with less favourable mortgage deals as the Bank of England creeps ever closer to that long-awaited interest rate rise.”
London remains the priciest location for first-time buyers. The average value of a first-time buyer property in the capital climbed to £343,614 in the three months to November 2015. The South East is the second-most expensive, with average FTB house prices there hitting £214,359 over the same period.
Conversely, the North East and Northern Ireland rank as the least expensive regions for first-time buyer properties. Average first-time buyer property values stand at £108,419 in the North East and £92,638 in Northern Ireland. Nationally, the average price for a first home stood at £156,226 in the three months to November 2015.
On average, Londoners put down by far the largest deposit of any region in the three months to November 2015, paying out £83,025 – more than five times the size of the average first-time buyer deposit in Northern Ireland (£15,556). The second-largest deposits are paid by first-time buyers in the East of England. Buyers there paid an average of £47,960 to secure their first home in the three months to November 2015, which equated to almost double the national average (£24,614).
Gill added: “The end of 2015 sees the south eastern corner of the UK remain dominant when it comes to property prices. The cultural, financial and political prowess of the capital – and its surrounding neighbourhoods in the South East – has proved to be an enduring lure for aspirational professionals and successful families. But that’s not the whole story. Home values in the East of England and the Midlands have also performed strongly due to a combination of investor interest in the buy-to-let market in those areas and buyers, particularly older ones, seeking a quieter environment, away from the hum-drum of the capital.
“For first time buyers, all of these factors make buying in and around London particularly tough – and explains the comparative strength of first time buyers in northern England, Northern Ireland and other parts of the country.”