FTBs affected by resilient house prices: Rightmove

The price of property coming to market has recorded a resilient seasonal fall of 1.1% in November, a smaller drop than the 1.8% average over the last six years according to the latest Rightmove house price index.

Related topics:  Finance News
Rozi Jones
14th November 2016
first time buyer ftb buyer young couple house
"Compared to 12 months ago the price of newly-marketed properties with two bedrooms or fewer is up by over 8%, twice the rate of the sectors containing properties with three bedrooms or more."

However despite the overall seasonal fall, there has been no respite for first-time buyers who have seen properties of two beds or fewer rise by 1.7% this month.

This now puts their annual rate of increase up nearly £15,000 to 8.2%, double the average percentage growth rate in other market sectors.

Rightmove research shows the two groups most pessimistic about their housing situation both contain potential first-time buyers. Those living with parents and the age group from 21 to 24 ranked highest in negative sentiment, in stating it is a ‘bad time to buy’.

One of the ways to make the price of the end product more affordable is to make the land element cheaper, though it is essential that this feeds through into cheaper new-build property and is subject to quicker building programmes.

Rightmove is calling for more help for first-time buyers in the upcoming Autumn Statement. Ideas that have been mooted include releasing suitable public land at below market value, speeding up and relaxing planning, and offering tax breaks to further incentivise landowners to sell up.

Miles Shipside, Rightmove director and housing market analyst commented: “Price resilience is not good news for cash-strapped aspiring first-time buyers, and in spite of the more subdued time of year the smaller properties that they typically target have increased in price this month, the only market sector to show an increase. Compared to 12 months ago the price of newly-marketed properties with two bedrooms or fewer is up by over 8%, twice the rate of the sectors containing properties with three bedrooms or more. In the sprint to get onto the housing ladder, wage inflation to help meet lender affordability ratios and to save for the larger deposits required is being comprehensively outrun by price increases.

“As well as helping people’s home-ownership aspirations, activity at the bottom rung of the ladder helps the rest of the market to move and through that boosts the wider economy.

"Short-term options that might be top of a first-time buyer’s list would be a stamp duty holiday exclusive to them. However, there are dangers to increasing demand unless this is matched by policies to improve supply, and more radical steps need to be taken to remove some of the barriers preventing more affordable homes to buy and rent from being built in the right locations.”

“Building two million extra homes in the short-term is not going to happen, so the immediate goal must be to meet the current 230,000 annual target for house building and to include more affordable options. This needs a co-ordinated approach to create an army of appropriately skilled workers, to include small and medium size developers, and to massively increase capacity and output. This has to be facilitated by more innovation, creative funding and overcoming some vested interests. Local Authorities or Housing Associations have a major role for both social rented housing and the ownership ladder, perhaps allowing renters to build an equity stake that leads to gradually increasing shared ownership.”

Brian Murphy, Head of Lending at Mortgage Advice Bureau, added: "For home movers, an upwards change in asking prices is all relative, as although the price of their onward purchase may have gone up, the likelihood is that the asking price of their current property has also risen, which may mean that with increased equity in their property they may be able to put down more of a deposit on their next home, thus potentially enabling them to secure a more competitive mortgage rate on a lower LTV. But for first time buyers, that’s not the case and this group appear to have seen the highest rise in asking prices of 8.2% on average year on year. Of course, the ongoing lack of suitable stock for those wanting to get on the ladder is perpetuated in many areas, as is the competition with BTL purchasers for whom the same stock makes an ideal investment.

"The good news is that many lenders, both high street and specialist, are offering 5% deposit mortgages and other specific products for first time buyers for those who qualify, therefore offering another option for this sector other than, of course, Help to Buy. We don’t know what the Chancellor has up his sleeve in terms of housing for the Autumn Statement, but given lenders’ increasing flexibility in terms of lending criteria and the proliferation of competitively priced products requiring low deposits available, all is not lost for those looking to get on the ladder just yet.  Having said that, any helping hand the Chancellor can give them would of course boost the entire market, given that first time buyers are essential to the property ecosystem and help to get the rest of the market moving.”

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