First time buyer activity accounted or 36% of UK housing market in February, up from 28% a year ago but the buy to let market has fallen off considerably, the latest research shows.
Indeed, buy to let purchases fell below 10% last month, the first time it has been at that level in five years, according to the latest report from Connells Survey & Valuation.
It points out that the near zero base rate has ensured that mortgages remain more affordable than ever with gross lending at its highest level since 2008 and first time buyers have seized the opportunity to get on the property ladder.
With first time buyers now making up a third of activity in the property this group has recorded the highest proportion of first time buyers since July 2011 and the highest February since 2010.
‘Continued affordable mortgages have provided first time buyers with an ideal opportunity to take their first step onto the ladder in February. Lending to aspiring home owners continues to rise, while the base rate remains so low. For those with enough savings for a deposit, now is a great time to buy. Many are taking advantage of the opportunities on offer,’ said John Bagshaw, corporate services director of Connells Survey & Valuation.
But, continuing the decline seen in recent months, buy to let purchases almost halved in February compared to the previous year. February 2016 did see an upswing in activity ahead of the stamp duty surcharge, but buy to let purchases now represent just 8% of market activity, the lowest level for February in over five years.
‘The stamp duty surcharge has succeeded in helping first time buyers at the expense of landlords. But this may well be temporary. Less competition for today’s first time buyers comes at the expense of tomorrow’s. Most people rent as they save for a deposit, but the steady investment into the rental market is running dry,’ Bagshaw explained.
‘With limited new homes being built for the private rented sector, rents will soon start to rise. This will devour tenants’ disposable income which would otherwise have been saved for a deposit. The problem will be exacerbated next month as mortgage tax relief is removed, forcing more landlords to exit the market or ramp up rents,’ he pointed out.
‘In the Housing white paper, the Government announced plans to boost build to rent and institutional landlords, but it will be years before anyone can move into the accompanying new homes. Rents remained relatively stable following the influx of investment before the stamp duty surcharge but tenants could soon feel the full force of recently announced Government policies,’ he added.
But he warned that the increase does not mean the Government has succeeded in boosting the prospects of first time buyers in the long term as the surge from 28% in February 2016 to 36% this February is only marginally higher than the 10 year average.
Over the course of the last decade first time buyers have been responsible, on average, for 35% of the market and Bagshaw pointed out that the 36% of valuations that first time buyers represented in February 2017 pales into insignificance compared to the 41% peak in February 2010.
‘The rapid growth in first time buyer activity is a recovery from a lower position, rather than a substantial improvement in market conditions. It’s important to not just look at the snapshot numbers but take into account the long-term trends. It’s still incredibly difficult to get on the property ladder,’ Bagshaw said, adding that with Brexit approaching, economic conditions may get tougher.
