Latest research has highlighted the extent to which first-time buyers are prepared to get ‘creative’ in their choice of property.
Over than 50% of first-time buyers are prepared to purchase a converted barracks, school or church, as demand in the property market strengthens, according to the latest First-Time Buyer Barometer from Your Move and Reeds Rains.
As of February, 57% of first-time buyers claimed they were willing to live in a former school in order to put their first foot on the property ladder, while 53% were prepared to purchase an ex-barracks and exactly half would accept a converted church.
This comes as demand from first-time buyers is putting pressure on the market, according to key indicators. The number of completed first-time buyer transactions stood at 27,900 in January, representing a 38.8% uplift from January 2015, when the figure stood at 20,100. Meanwhile, the average price of a first-time buyer home in January has risen by 12.9% on an annual basis from £146,952 to £165,945 – an increase of £18,993.
There were still limits to many first-time buyers’ enthusiasm for purchasing converted public property, however. Only 25% of such buyers were willing to have an ex-hospital as their first home and only 14% would opt to purchase a renovated prison in order to set foot on the property ladder.
Adrian Gill, director of estate agents Your Move and Reeds Rains, said: “Whether it’s bedding down in a barracks or saying ‘home sweet home’ to a hospital, many first-time buyers are ready to get creative to snap up their first home. That the government has decided to convert old public buildings to homes at all is a sign that conventional housebuilding is struggling to keep pace with enthusiastic home-buyers. It’s a sellers’ market – and supply of homes is the issue of our times.
“More importantly, it’s a testimony to the pluck and ingenuity of first-time buyers that they’re willing to break the mould and live in places their parents wouldn’t have dreamed of inhabiting. Of course, there are some ex-public buildings which are too much of a social stretch for even first-time buyers to consider – even the least pricey ex-prisons are still too off-putting, for example. But with home values rising and demand at bottom end of the market showing no sign of letting up, ex-public buildings could offer the value-for-money many first-time buyers crave. When it comes to having a place to call their own, they could do worse than spend at night at the museum.”
The barometer has also revealed that tenant optimism about the purchase market has risen, despite hikes in mortgage and deposit costs.
When tenants were asked in January when they planned to purchase their first home, 15% replied that they expected to do so within the next 12 months – up from 6% who said the same in September 2015 and 14% in February 2015.
Conversely, the proportion of renters who believed that they will, realistically, probably never set foot on the property ladder stood at 10% – down from 12% in September and 13% in February 2015. In addition, those in rental accommodation wishing to become property-owners has remained at sky-high levels, with 94% of current tenants stating in January that they wanted to own their home, representing no change on February 2015.
Meanwhile, the average first-time buyer deposit stood at £28,393 in January – an increase of 6.3%, or £1,692, on a 12-month basis and the highest since August 2013. This has impacted on the proportion of average first-time buyer income that is eaten up by deposit costs. In January 2015, a property deposit ate up, on average, 70.3% of first-time buyer income; by January of this year, the figure had risen to 72.2% – the highest since December 2013.
At the same time, the average LTV rate is beginning to fall, with January’s figure of 82.9% representing a 0.5 percentage point monthly fall and a 0.3 percentage point quarterly fall. This means those looking to buy their first home will be able to borrow less against the value of their desired property and, as a result, will have to pay more upfront. Despite this, the absolute number of higher LTV loans rose in January by 7.3% on a monthly basis, according to the latest Mortgage Monitor from e.surv.
Gill said: “First-time buyers are moving from weariness to fearlessness. They are long-used to the housing market being a sellers’ arena and have come to expect daunting deposit costs and prohibitive property prices. But, ultimately, the desire among first-time buyers to own their own home is outweighing those considerations as they resolve to get on the property ladder sooner rather than later – be that through saving money or compromising on their property specifications.
“Moreover, despite the gloomy headline figures, there are still enough positive fundamentals in the property market to make taking the plunge a worthwhile investment. High LTV loans are plentiful, the average mortgage rate is still at rock-bottom levels – bolstered by the Bank of England’s refusal to contemplate raising rates anytime soon – and the economic outlook remains mostly sunny. Indeed, first-time buyers getting on the ladder now are demonstrating cunning as well as courage – they understand that, while the homeownership costs may not be ideal, conditions could be worse. After months of turbulent fortunes, they’ve come to know better than to look a gift horse in the mouth.”
The looming end of part of the Help to Buy Scheme has had no impact on when the vast majority of first-time buyers planned to purchase their own property.
When first-time buyers were asked if the December 31st 2016 expiry date for the mortgage guarantee part of the Help to Buy scheme made any difference on when they chose to step onto the property ladder, 43% said it had made no impact and a further 30% claimed they had never heard of it.
Of those who said that the deadline had made some sort of difference to their purchasing plans, only 18% said it had made a moderate or significant difference.
Gill said: “It’s disappointing to see the Government’s Help to Buy scheme has not quite penetrated into the mainstream of the first-time buyer market. It’s a great product for those who have the capital and job security to sustain regular mortgage payments, but who just need a little support paying the initial costs to secure that ideal home. It’s also worth noting that even if the scheme assisted only a fraction of the first-time buyer market, that’s still several thousand people every year who have had their homeowning aspirations realised in part because of Help to Buy. Amid all the impersonal data, it’s important to not lose sight of these human stories.
“Nevertheless, we are clearly seeing a growing trend of self-reliance among the first-time buyer population. They prefer to use their own initiative when saving for their first home, rather than reply on state support, however well-intentioned. With a positive economic climate where job security is strong and real-terms wages are rising, it’s realistic for first-time buyers to have this tough but optimistic outlook. Let’s hope they can keep hold of it as 2016 progresses.”
In February, the highest average purchase price was paid by first-time buyers in London at £344,418, while Northern Ireland was the cheapest region for first-time buyers, with the average prices in the region standing at £92,665.
