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First time buyers increased in the UK in March and paid less for their home
The number of first time buyers in the UK increased in March to a total of 32,500, the highest figure since June 2014, according to the latest tracker report. Overall first time buyer volumes grew by 47.7% on a monthly basis and as well as cheaper prices the burden of deposit costs and mortgage payments dipped, the data from the Your Move and Reeds Rains report shows. This means that, between February and March, the total flow of buyers managing to step foot on the ladder for the first time grew by 10,500 and on an annual basis, the total number of first time buyers in March grew by 34.9% compared to March 2015. Adrian Gill, director of estate agents Your Move and Reeds Rains, pointed out that while much was made of March being the month of the buy to let landlord and the second home buyer due to the April deadline for additional stamp duty, the surge was not at the expense of the bottom rungs of the ladder. He believes that a continuation of the broadly positive economic climate has likely been a factor spurring would-be first time buyers. ‘However, what’s really getting those numbers up is the fact that the range of support options available to first time buyers is at last beginning to be recognised and utilised,’ he said. ‘The Help to Buy scheme is assisting those with limited capital recognise their dreams, while the Government’s offer of cut price homes for first time buyers is easing supply in a part of the market that typically struggles to match roaring demand with constrained supply,’ he added. The data also shows that March has seen a lightening of home ownership costs and the charges associated with it. The average purchase price paid by first time buyers in March stood at £166,559, down 1.2% in absolute terms compared with February which previously marked the highest average price on record. But on an annual basis, the average purchase value of a first time buyer property rose by 9.2%. Deposit and monthly mortgage payment costs also declined. First time buyer deposits averaged £28,233 in March, down 4.1% compared with the previous month. In addition, the proportion of an average first time buyer’s monthly income that is consumed by deposit costs fell 3.1% between February and March from 74.9% to 71.8%. Meanwhile, over the same period, monthly mortgage payments accounted for a steadily decreasing amount of average first time buyer income, falling from 20.4% of monthly income in February to 20.3% as of March. Besides the falling costs of home ownership, lending conditions for firs time buyers have remained favourable. The average loan to value (LTV) ratio reached 83% in March, marking a 0.5% uptick on the previous month, meaning first time buyers will be able to borrow more against the value of the home they wish to purchase. The average first time buyer mortgage rate continues to fall, dropping from 3.14% in February to… Continue reading
UK housing market slows after buy let rush in March, latest index shows
UK house prices increased by 0.2% in April but annual house price growth has slowed to 4.9%, down from 5.7% the month before, the latest index figures show. This takes the average price of a home to £202,436 with the slowing of activity not a surprise due to increased market growth in March due to stamp duty changes, according to the index report from the Nationwide. Robert Gardner, Nationwide's chief economist, said that the slowdown returns the annual pace of house price growth to the fairly narrow range between 3% and 5% that had been prevailing since the summer of 2015. ‘It may be that the surge in house purchase activity resulting from the increase in stamp duty on second homes provided a temporary boost to prices in March. However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead,’ he explained. He pointed out that there were 165,400 transactions in March, an all-time high, some 11% higher than the previous peak of 149,000 recorded in January 2007 and estimates from the Council of Mortgage Lenders suggests that mortgage lending also rose sharply, to almost £26 billion in March, up 43% from the £18 billion recorded in February. ‘If confirmed by Bank of England data later this week, this would suggest a strong outcome, up nearly 60% year on year and also well above recent highs of £22 billion per month recorded in early 2015, though still well below the all-time high of £34.9 billion recorded in June 2007,’ Gardner said. ‘The increase in mortgage lending is likely to have been driven by a sharp increase in buy to let investors bringing forward their purchases before the stamp duty changes took effect. Buy to let has accounted for an unusually high share of lending in recent months, at around 19% of lending in the three months to February, but the strength of activity suggests its share could surpass 25% in March,’ he explained. ‘Viewing the transactions and mortgage lending data together suggests that, while buy to let lending is likely to have risen strongly in March, a large proportion of the boost to house purchase activity came from cash buyers,’ he added. Gardner also pointed out that cash purchasers have become a more significant part of the market since the financial crisis, accounting for around 35% of all transactions since 2008 compared with around 25% in 2006/20007. ‘Cash investors would have also been better placed to buy properties in the relatively short period of time between the stamp duty announcement at the November Autumn Statement and the implementation on 01 April,’ he added. But a continued limited supply of properties could mean that the market could still be lively in the coming months, according to Michelle Grant, investment director of Grant… Continue reading
UK landlords set to invest less ahead of tax changes
Private sector residential landlords in the UK are strengthening their credit profiles as they shift investment away from new acquisitions and towards the upgrading of existing portfolios, a new report suggests. Following announcements from the government last year that tax relief on rental income would be reduced, and stamp duty increased on buy to let purchases there has been a fall in buying intentions in the first quarter of 2016. The latest Private Rented Sector Trends report from Paragon Mortgages shows that just 9% of respondents intend to purchase a property over the next three months, down from 14% in the previous quarter. The report explains that this reduction coincides with rising levels of awareness about the implications of the tax relief changes. More than three quarters, 76%, of respondents said they now understand what the changes to tax relief will mean for them, up from 62% in the fourth quarter of 2015. Alongside scaling back on short term investment plans, landlords are also improving their credit profiles. Average levels of gearing, the value of an investment portfolio less existing outstanding mortgages, are down from 38% in the fourth quarter of 2015 to 36% in the first quarter of 2016. The research report also show that some 67% of landlords surveyed have borrowings of less than half the value of their investment property portfolios. Affordability levels are also improving with landlords spending, on average, 28% of their rental income on mortgage repayments, while 51% spend less than a quarter of their rental income on mortgage repayments. Returns are also very stable with the average net rental yield remaining at 4.7% for the third consecutive quarter. The latest data also indicates that landlords are considering upgrading existing portfolios. Asked whether, as a consequence of reduced tax relief on rental income, landlords would reduce maintenance of their properties, just 12% said they would, down from 25% in the fourth quarter of 2015. On the question of whether landlords would make fewer improvements to their properties, just 14% said they would make fewer improvements, a figure more than halved since the previous quarter when it stood at 31%. ‘The PRS is facing the prospect of a great deal of change as a result of the significant shift we have seen in fiscal and regulatory policy,’ said John Heron, director of mortgages at Paragon. ‘Some landlords are responding to this uncertainty by planning fewer new purchases and investing in their existing portfolios. At the same time credit profiles are very robust and improving, a picture that is somewhat at odds with the picture being painted in some quarters,’ he explained. ‘If landlords materially reduce investment, those that have to rely on the PRS for a home could be hit quite hard. It may well become even more difficult and expensive to rent a home with no obvious commensurate benefit to home owners,’ he added. Continue reading
