Despite numerous obstacles, including rising unaffordability in many parts of the country , the number of first time buyers continues to grow. But can this good news story continue?
One of the main reasons I started my property blog earlier this year was to help with the provision of helpful free information and resources for would-be first time buyers wanting to get onto the property ladder.
It is therefore great to see that this year is set to be very good for first time buyers.
The dominant driver has been the fall off in buy to let landlords due to higher stamp duty rates, greater taxation of rents and stricter borrowing criteria – as well as the softening of prices in various parts of the country.
The availability of home loans at competitive rates of interest has also been a big help, along with the government’s various Help to Buy initiatives.
1. The return of first time buyers
The credit crunch which impacted from 2008 dealt a severe blow to first time buyers – the number of them collapsing from 359,900 in 2007 to 192,300 in 2008.
2017 was an important year for the number of first time buyers. It reached a 10 year high of 359,000 after 6 years of growth – just shy of the 359,900 2007 high.
From 2007 to 2017 all areas of the country apart from London and the north of England experienced growth in the number of first time buyers.
In London FTBs fell by 26%, with the average price of a home being a forbidding £422,580 – around twice the national average. The north of England experienced a drop of 5%.
Northern Ireland saw the highest growth of first time buyers in the 2007-2017 period – up 65%.
2. The improvement continues
Indications are that 2018 has been another good year for first time buyers.
Earlier this year UK Finance reported that in May 2018 there were 32,200 mortgages to first time buyers, up 8.1% on May 2017.
In contrast the number of mortgages to buy to let landlords fell by 9.8% in the year to May 2018 – suggesting a correlation between the falling number of purchases by BTL landlords and the rising number of FTBs.
Third quarter lending stats from UK Finance show that the number of first time buyers approved for mortgages in London was 11,700 – the highest total since 2015.
Research by Lloyds Bank released in November revealed that the number of first time buyers in Wales had reached the highest level since 2004 – with 7,791 FTBs in the first half of 2018.
Year-end figures for 2018 for the UK as a whole are expected to show further growth in the overall number of first time buyers.
3. Factors favouring continued growth
There are a number of indicators that FTB numbers will continue to grow:
- In the last budget, the government extended the Help to Buy equity loan scheme to 2023
- BTL landlords are expected to continue exiting the market, allowing FTBs to step into the void
- Unless there is a disorderly Brexit or no Brexit, the mortgage lending climate for first time buyers is expected to remain benign with no indication of significant interest rate rises for a number of years
- The Bank of Mum & Dad continues to help FTBs onto the property ladder, with parents expected to lend an average of £17,000 to children in 2018 according to Legal and General
- Recently there have been signs of real wage growth since the 2008 credit crisis, enabling more FTBs to save deposits and secure the level of borrowing they need
- A September 2018 poll of brokers for United Trust Bank saw brokers ranking the first time buyer sector as offering developers more opportunities for growth than any other sector over the next 3 years.
THE ADVANTAGES OF BUYING
Why become a homeowner (the many benefits enjoyed by owner-occupiers)
Why renting is super stupid (rock solid reasons why you should buy not rent)
Easy home ownership (10 super-powerful reasons for homeownership)
4. Parents stepping up to the plate
Although (according to Legal & General) the total amount being contributed by parents to first time buyers will fall in 2018 compared to 2017, parents are assisting with more home purchases than ever… 317,000 this year – up 3% on 2017.
Further, parents are increasing their contribution in those regions where their help is most needed – especially London, the most expensive part of the country.
41% of buyers in London receive parental assistance with their purchase – more than any other region.
This helpfulness by parents should help FTB numbers to increase even in the most unaffordable locations.
TOP TIPS WHEN BUYING
Top 5 tips for first time homeowners the world over (essential general information)
10 easy ways onto the property ladder (must know ways to become a homeowner)
Beware of developers bearing gifts (why not all incentives are a giveaway)
Things remain extremely challenging for first time buyers:
- Homes continue to be less affordable taking into account average earnings
- Deposits are getting bigger (astronomical in places like London)
- The average age of first time buyers continues to rise.
However, there is every reason to expect the number of first time buyers to grow – especially whilst Help to Buy is available, mortgages are plentiful and interest rates remain at near historic lows.
When the economy goes into inevitable recession – probably sooner than experts are predicting – first time buyers may once again find it fiendishly difficult to get on the property ladder.
If you are a would-be first time buyer who can afford to buy, it is probably not a good idea to delay too long before doing so.
Are you a would-be first time buyer or do you know a would be first time buyer? What is the biggest hurdle to buying for you or the would-be first time buyer? Please leave your comments below.
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Rebel Property Coach
My website is: www.rebelpropertycoach.com