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First time buyer demand boosts UK residential property market

The total number of residential valuations conducted during January increased on an annual basis, with 43% more valuations than a year ago. However, this represented a slight decline of 15% on a monthly basis, following the valuation market’s strongest December performance since 2007.

Increasing demand from first time buyers was a key factor in the annual growth in activity, the report says. The number of valuations conducted for first time buyers rose by 52% compared to January 2011.

Although this represented a 2% monthly decline, valuations for first time buyers grew as a proportion of the market in January. In fact, first time buyer demand accounted for 32% of all valuations completed – the highest proportion since June 2011.

‘A comparison against the strongest December since the downturn masks the underlying strength of the valuations market in January. The ongoing affordability of mortgages, not to mention lenders’ increasing commitment to higher loan to value lending, has helped boost valuations activity,’ said John Bagshaw, corporate services director of Connells Survey and Valuation.

‘However, there has also been a strong uplift in first time buyer activity, with new buyers rushing to beat the end of the stamp duty holiday in March. In turn, this has unlocked activity further up property chains,’ he explained.

‘While the flurry of first time buyer activity is likely to subside slightly after March, the introduction of the government’s NewBuy scheme may help sustain buyer demand in the longer term,’ he added.

The report also shows that remortgage market continued its annual growth in January, with remortgage valuations rising by 48% compared to January 2011. While the number of remortgage valuations dropped by 17% on a monthly basis, remortgaging now accounts for 26% of all valuations, the highest level since October 2008.

‘Increasing product choice, alongside stubbornly low mortgage rates, has helped sustain the remortgage market. While an interest rate rise doesn’t look on the horizon this year, many borrowers are looking to cash in on cheap fixed rates while they can to provide long term financial security in the face of an uncertain outlook for the economy,’ said Bagshaw.

Demand from both home movers and landlords contributed to the annual increase in housing market activity. While activity from owner occupiers moving home declined by 24% on a monthly basis, it increased by 40% annually. The number of valuations for property investors looking to expand their portfolios increased by one fifth, 21%, year on year, despite a monthly dip of 11%.

‘The buy to let market’s annual growth continued in January, as returning and first time investors were enticed to the sector by an attractive combination of high yields and broadening options for mortgage finance. While the government scheme’s mortgage indemnity is likely to help overall transaction levels in 2012, there will still be excess demand from frustrated buyers, and an expanding private rented sector will help underpin growth in the valuation market in the long term,’ he added.