First-time buyer prices surge 10% as demand intensifies

October saw a new all-time high of £296,549 for the price of property coming to market, fuelled by high demand for first-time buyer properties, according to the latest Rightmove house price index.

Related topics:  Finance News
Rozi Jones
19th October 2015
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Two bedrooms or fewer properties are now at their highest price ever, an average of 9.6% (+£16,105) more expensive than a year ago, far outstripping the overall annual rise of 5.6% for all property types.

On the whole, October saw a relatively modest monthly increase for the time of year, at 0.6% - the lowest October increase since 2010 (+0.2%) and an average October rise of 1.8% over the previous five years.

The Rightmove index said that housing demand had now become a "vicious circle" as high tenant demand leads buy-to-let investors to go head-to-head with first-time buyers.

Jeremy Duncombe, Director, Legal & General Mortgage Club, commented:

“The lack of properties coming on to the market is causing house prices to vastly outstrip wage growth and inflation.  This makes it very difficult for those looking to buy, as prices are rising faster than they can save for a deposit.

"Steep house price inflation will continue to push people out of the market until more houses are built to accommodate those looking to get on the ladder. The country needs around 250,000 extra houses per year in order to tackle the house building deficit make house prices more affordable.”

Miles Shipside, Rightmove director and housing market analyst, said:

"With inadequate supply from housing associations and the public sector, private landlords are one of the few active providers of smaller homes for rent. However, when this need is combined with first-time buyer demand, boosted by the return of low-deposit mortgages and lenders competing to reduce their rates, it creates a vicious circle due to the limited supply of suitable properties for sale in this most active sector. The number of first-time-buyer properties (two bedrooms or fewer) coming to market is down by over 8% on the same period a year ago.

“With local authorities, housing associations and developers no longer satisfying the country’s housing needs, those in particular looking to rent or buy smaller homes must hope for the cavalry to come to their rescue, in the form of government action or large-scale institutional investment. Initiatives such as continued relaxation of planning rules to boost building, 200,000 new affordable homes available to buy over the next five years, or American-style institutional investment in the rented sector will take time to come over the hill, as the sound of bugles is still in the distance. In the meantime, it seems the army of privateer buy-to-let investors remains the only short to medium term way to scale up our rental capacity.

“Tenant demand is such that many letting agents are reporting viewings and tenancy applications on the same day as marketing properties. In some cases they’ve nothing left to rent until tenants move out or a new influx of investor landlords gives some short-lived respite to tenants-in-waiting. Both investor landlords and first-time buyers looking to buy smaller homes are finding them in short supply. As they’re typically owned by potential first-time sellers, the price gap and costs of moving to the second step on the housing ladder deter them from coming to market. Competition is most fierce in this sector, with first-time buyers and buy-to-let investors going head-to-head for the same properties.”

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