The Halifax has estimated that in 2014 first-time buyer numbers were at their highest level since 2007.
Over the last 8 turbulent years property prices, lack of suitable available property, lending criteria, the cost of living and slow wage growth have all played a part in hampering the efforts of first time buyers entering the property market but people wanting to own property are not easily deterred.
The number of first-time buyers, The Halifax estimates, reached 326,500 people, an increase of 22% on 2013 figures.
So what has brought first time buyers back to the market?
Improved mortgage rates and government schemes to support the construction of more new homes, and Help to Buy in particular, have opened up the prospect of owning your home over the last year.
This has been bolstered by improving employment. Affordability, though still often an issue, is better as better mortgage rates have allowed a reduction in the size of the national average deposit which dropped by 7% over 2014 to £29,218 from £31,582 in 2013.
First-time buyers are also spending a smaller proportion of income on the mortgage than in previous years, 32% of disposable income in the third quarter of 2014, that’s a huge change from 2007 when a first time buyer might expect to pay 50% of their income on their mortgage.
Help to Buy gained greater traction in 2014, allowing people (not just first time buyers) to put down a deposit of 5% of the selling price to secure a property. 80% of Help to Buy scheme users were first-time buyers. However property price increases flew in the face of this scheme somewhat, the national average first time buyer paying £171,870 for their first home in 2014, a 9% rise on 2013.
Will this continue to improve in 2015?
There are measures being introduced or that have been introduced of which we are yet to feel the benefit:
- Changes to the Stamp Duty Land Tax system have yet to be felt. Property pricing is now liberated to be accurate and not held back by stamp duty bracket barriers. On a property costing £200,000 stamp duty before the change would have been £2,000, now a buyer would pay £1,500. That £500 can go a long way towards other costs of moving and could make the difference.
- Motivation and incentives from government to speed up the building of efficient new homes include changes to planning policy to exempt small developments from being subject to Section 106 local contributions and zero-carbon policies.
- Affordable homes at 20% under market value to be offered as part of the governments new Starter Home Initiative.
- Help to Buy Equity Loan and Mortgage Guarantee schemes continue to support the provision of housing with a 5% deposit.
- Mortgage lenders have been slashing long term rates provides some of the best mortgage products available for some time.
- Property prices are not expected to rise as rapidly in 2015 as 2014 creating a more stable environment for buyers, though pressures on supply do continue to apply an upward pressure.
Are you looking to buy your first home?