Tuesday, November 30

How first time buyers could benefit from weak house price growth


 

 

The number of first-time buyers in the property market is approaching levels seen before the financial crisis even as house prices stall.

New homeowners are capitalising in a buyer’s market, with April marking the fifth consecutive month that annual property inflation across the UK was less than 1 per cent, Nationwide’s latest House Price Index revealed today.

Since this time last year average property prices across the UK have increased by just £1,920, or 0.9 per cent, to £214,920.

Jonathan Hopper, managing director of Garrington Property Finders, said: ‘At a national level, house prices have made stagnation into an art form.’

House prices rose 0.4 per cent in April, Nationwide said, although this figure is seasonally-adjusted, without which the £1,818 monthly gain in the average property price would have represented a 0.85 per cent rise.

A slight pick-up in recent months means that at £214,920, the average home is almost £3,000 more expensive than the £211,966 recorded in January this year but £2,090 lower than the peak reported by Nationwide in July 2018.

Nationwide’s chief economist Robert Gardner described the housing market as ‘in favour of buyers’.

House prices rose 0.4 per cent in April, Nationwide said, although this figure is seasonally-adjusted, without which the £1,818 monthly gain in the average property price would have represented a 0.85 per cent rise.

A slight pick-up in recent months means that at £214,920, the average home is almost £3,000 more expensive than the £211,966 recorded in January this year but £2,090 lower than the peak reported by Nationwide in July 2018.

Nationwide’s chief economist Robert Gardner described the housing market as ‘in favour of buyers’.

The latter is controversial, however, as some analysts claim that Government Help to Buy schemes are propping up the country’s stagnant housing market, while simultaneously lining the pockets of directors and shareholders at housebuilding companies.

Nationwide’s chief economist, Robert Gardner, said: ‘First time buyer numbers have been supported by the strength of labour market conditions, with employment rising at a healthy rate, and earnings growth slowly gathering momentum.

While house prices remain high relative to average earnings, low mortgage rates have helped to support mortgage affordability. Indeed, raising a deposit appears to be the major barrier for prospective first time buyers.

A solo first-time buyer in London would need to be earning around 60 per cent more than the average Londoner in order to get a mortgage. This compares to the North West where a solo first-time buyer could earn roughly the same as average full-time worker and Scotland where they could earn about 7 per cent less.

While the number of properties coming onto the market has also slowed, this does not appear to have been enough to prevent a modest shift in the balance of supply and demand in favour of buyers in recent months.

Mr Gardner said: Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, even though survey data suggests that sentiment has softened.

Nationwide’s figures show that last year first-time buyer incomes were in line with or below average incomes in most regions.

But, in the East, South East and London, first-time buyers’ incomes were significantly higher than average incomes in those regions, causing many to be priced out of the market in areas like London.

Also, it looks questionable whether the labour market and earnings growth will sustain their recent strength as companies tailor their behaviour to a relatively lacklustre domestic economy, prolonged Brexit uncertainties and a challenging global environment.

Consequently, we suspect house prices will rise only 1 pr cent over the year and would not be at all surprised if they stagnate.

We suspect house prices will rise only 1 per cent over the year and would not be at all surprised if they stagnate

The market needs first-time buyers so that second-steppers can move up the ladder to bigger homes.

Meanwhile, Jonathan Hopper, of Garrington Property Finders, said: For five months in a row the annual pace of price rises has been stuck at below 1 percent.

Yet that insipid national average is the sum of some widely divergent regional markets. In the weakest markets we’re seeing homes change hands for 30 per cent below guide price, while in the hottest areas 10 per cent above is not unusual for the most sought-after homes.

Prices in London and the South East continue to slide. Discretionary sales in these former hotspots have all but ceased, with sellers who have no choice but to put their home on the market having to recalibrate asking prices or accept low offers.

Elsewhere the combination of patchy demand and low supply have fused into a delicate stand-off in which buyers who detect strong value are slowly nudging up prices.

He added: Almost three years on from the EU referendum, there is no end in sight to Britain’s political limbo, yet on the property front line we’re seeing increasing numbers of buyers seize on Brexit uncertainty to make aggressive offers and secure some big discounts.