There was a tradition fall in the number of first-time buyers between November and December, according to the latest First-time Buyer Tracker from Your Move & Reeds Rains.
Numbers fell by 1,300 during the period.
The number of buyers taking their first step onto the ladder in the festive month stood at 26,600 – a fall of 4.7% on the previous month of November, when the figure totalled 27,900.
However, first-time buyer activity has grown steadily, with volumes up by 1.1% – or 300 more first-time buyers per month – between December 2014 and December 2015.
Adrian Gill, director of estate agents Your Move and Reeds Rains, said: “December’s first-time buyer market is once again suffering from the effects of the Christmas crunch. Most of those looking for their first home turn their attention – and their finances – towards an often very costly festive season. As a rule, they tend to put their home ownership ambitions on hold until the New Year. It’s an inevitable part of the seasonal cycle that the property market goes through every year.
“Beyond this, an examination of the year-on-year figures reveals a property market that – festive slowdown aside – is going from strength to strength. Steady growth over the course of the year indicates a resurgence in first-time buyer confidence. First-time buyers have been buoyed by a positive economic climate and a range of Government incentives – such as the reduction of Stamp Duty on lower-priced properties – designed to lessen at least the immediate costs of home ownership. They have increasingly come into their stride as 2015 has progressed. Some of the credit for this revival in activity should also go to first-time buyers themselves. Over the course of the year they have toughened up their act and sought to get the best property they can at the best price – it’s a skill that will serve this group well as they head into 2016.”
The cost of an average first-time buyer home fell on a monthly basis in December. Between November and December, the average price at which a first-time buyer bought a house fell from £153,275 to £152,470 – a drop of 0.5%, or £805. However, over the course of the year, the average purchase price rose by 3.8%, representing an increase of £5,518 between December 2014 and December 2015.
In addition, December saw a fall in the costs of getting on the ladder. The average deposit put down by a first-time buyer in December fell by 0.5% – or £117 – on a month-on-month basis to stand at £25,292. This is indicative of a broader trend of deposit costs falling over the course of the year, with the average cost of a deposit dropping by £2,151 (7.8%) between December 2014 and December 2015. The decline in the burden of the average deposit on a first-time buyer is reflected by the fact the proportion of an average first-time buyer’s income that is eaten up by the deposit fell from 64.6% in November to 64.3% in December. Between December 2014 and December 2015 the proportion fell by 6.8 percentage points.
First-time buyers in December also benefitted from a reduction in the regular burden placed on their finances by mortgage repayments. In November, 19.3% of a first-time buyer’s average income was consumed by monthly mortgage payments, by December this had fallen to 19% – the second-lowest figure on record (the lowest being 18.9% in August 2015).
Meanwhile, the average loan to value ratio stayed static – at 84.4% – between November and December. However, over the course of 2015 LTV ratios have steadily ticked up, rising by one percentage point between December 2014 and December 2015, meaning first-time buyers have been able to progressively borrow more against the value of their desired property.
On a monthly basis, the total number of higher LTV loan approvals dipped 3.1%, according to the latest Mortgage Monitor from e.surv. However, from a year-on-year basis perspective, the total number of such loans jumped by 31.9%. Equally, the average first-time buyer mortgage rate stood at 3.27% in December – representing both a 0.1 percentage point dip on the previous month and the lowest mortgage rate on record.
Gill said: “For those willing to put Christmas concerns and festive fun to one side, December offered an opportune time for first-time buyers hoping to get on the ladder and not break the bank. First-time buyer home values stalled in their upward advance. But, on a long-term basis, values increasing steadily indicate there’s more work to be done, by both Government and house builders, before that short-term flash can be turned into a long-term improvement.
“It’s also pleasing to see a decline in the proportion of first-time buyer monthly income consumed by monthly mortgage repayments. This is a sign both that first-time buyers are enjoying sustained real-term increases to their salaries and that they are not burdening themselves with hefty mortgages for properties they will struggle to afford. Moreover, the Bank of England allaying fears in December – and in January – of any imminent rate rise has succeeded in keeping mortgage rates low. This is yet more welcome news for first-time buyers, for whom every pound in their pay packet counts. These are favourable conditions which first-time buyers will hopefully still be able to enjoy early on in 2016, provided they can shake off the last of the festive fuzz and focus their minds once more on setting foot on the property ladder.”
London remains the priciest location for first-time buyers. The average value of a first-time buyer property in the capital climbed to £343,686 in the three months to December 2015. The South East is the second-most expensive, with average first-time buyer house prices there hitting £211,807 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 £92,665 in Northern Ireland. Nationally, the average price for a first home stood at £156,276 in the three months to December 2015.
On average, Londoners put down by far the largest deposit of any region in the three months to December 2015, paying out £83,094 – more than five times the size of the average first-time buyer deposit in Northern Ireland (£15,561). 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 December 2015, which equated to almost double the national average (£24,621).
Gill added: “December brought no let-up to the price gulf between London and the rest of the UK, with average property values in the capital well over double the UK average. This is a reflection of the continuing popularity of the area among a combination of young professionals, successful families and investors, all of whom are willing to pay heavily to enjoy the culture, history and sheer ‘buzz’ of London.
“However, London is not the whole story. The East of England is continuing to enjoy rapid rises in property prices, as workers seeking a quieter life than what the capital can offer migrate to places such as Norwich and Cambridge – successful cities combining history with established tech credentials.”