First-time buyer transactions on the rise

First time buyer transactions rose by 28% in May to 16,170 following a sharp decline in April following the return of stamp duty for first-time purchases. The average price of a first-time buyer property has also gone up, by 4.3% to £127,493.

Wealthier buyers pushed up first-time buyer prices in May, says the report from LSL property services, and the affordability of both deposits and mortgage repayments improved on a monthly basis. Buyers had to pay less for properties in May than their counterparts in February and March who were pushed to complete before the stamp duty deadline. Deposits in May represented 71.6% of the average first-time buyer’s annual income, down slightly from 71.8% in the previous month, while mortgage repayments account for 19.6%, down from 21.6% in April.

“May’s rise in first-time buyer transactions shows the strength of underlying demand among those able to put up a large enough deposit,” said David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains. “The market is now being driven by buyers with enough money to absorb the additional tax burden. While the number of tenants able to leave the private rental sector remains historically low, those that can are taking the opportunity to enjoy the currently highly affordable mortgage rates on offer. When making loans to buyers with large deposits, lenders have shown they are happy to let borrowers take advantage.”

The report shows that the most common reason would-be first time buyers are waiting before buying a house is their inability to put together an adequate cash deposit. High transaction costs were mentioned by 15% of buyers, although only 4.7% said the prospect of falling house prices concerned them.

“Buyers clearly still feel buying a house is a good investment,” added Newnes, “which makes it all the more frustrating that the need to save a large chunk of cash and growing transaction costs are the main reasons they can’t take the plunge.”

The profile of a first-time buyer
* The average first-time buyer in May was aged 28 and had an income of £36,069.
* Just over 30% were looking for a two bed house and 35% were seeking houses with three or more bedrooms. The next most popular type of property was two-bed flats, 21%
* The majority of first-time buyers receive help from their families to fund a purchase. Only 39% of first-time purchases were entirely self-funded, while 57% received help in the form of inheritance, or direct assistance with the deposit or mortgage payments. Only 0.6% said they received help from a government first-time buyer scheme.
* First-time investors expect on average to remain in their properties for an average of 6.9 years.

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