More first-time buyers in a subdued market

Michael Lloyd

May 1, 2019

April was the fifth month in a row in which annual house price growth has been below 1% despite first-time buyer numbers recovering, Nationwide’s House Price Index has found.

House price growth remained subdued in April, with prices just 0.9% higher year-on-year while the number of mortgages being taken out by first time buyers has continued to approach pre-financial crisis levels in recent months.

Robert Gardner, Nationwide’s chief economist, said: “While the ongoing economic uncertainties have clearly been weighing on consumer sentiment, this hasn’t prevented further steady gains in the number of first time buyers entering the housing market in recent quarters.

“First-time buyer numbers have been supported by the strength of labour market conditions, with employment rising at a healthy rate, and earnings growth slowly gathering momentum.

“While house prices remain high relative to average earnings, low mortgage rates have helped to support mortgage affordability.

“Indeed, raising a deposit appears to be the major barrier for prospective first-time buyers, since the cost of servicing the typical mortgage remains in line with or below long-run averages as a share of take home pay in most regions of the UK.”

While the number of properties coming onto the market has also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of supply and demand in favour of buyers in recent months.

Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, even though survey data suggests that sentiment has softened.

Measures of consumer confidence weakened around the turn of the year and surveyors report that new buyer enquiries have remained subdued.

In 2018, first-time buyer incomes were in line with or below average incomes in most regions. However, in the East, South East and London, first-time buyers’ incomes were significantly higher than average incomes in those regions, 60% higher in London.

This illustrates the extent to which many prospective buyers are priced out of the market in those areas.

Guy Harrington, chief executive of specialist property lender Glenhawk, added: “The good news is that first-time buyers are wading back in and hopefully picking up some good value stock.

“We need to end the perception, perpetuated by these reports, that the market is ‘weak’ and get used to stagnant house prices, not the rocket ship growth we have had in previous decades which was simply just not sustainable.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Soft growth in the last set of figures from Nationwide is continuing and confirmed on the high street. Clearly, Brexit uncertainty in the minds of homebuyers is still outweighing almost record low mortgage rates and employment numbers, as well as improved affordability.

“A glimmer of good news is that first-time buyers are taking advantage, particularly of Help to Buy and deposits from the Bank of Mum and Dad, not forgetting reduced competition from landlords.

“However, landlords leaving the sector has meant some hardening of rents which has made deposit saving, we are finding particularly in London, more difficult, and which is making that illusive first purchase trickier.”

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