LSL Property Services : October 14 First Time Buyer Tracker

October 2014

First-time buyer sales climb 11% despite wider market slowdown

 September sees 25,800 first-time buyer completions - up 11% compared to 23,200 a year ago

 Average first-time buyer deposit falls 8% year-on-year to £26,134, despite purchase prices rising

 Average first-time buyer deposit now represents 67.6% of annual first-time buyer income - down 12 percentage points year-on-year

The number of first-time buyer house completions in the UK increased year-on-year in September, defying trends of a slowdown in the market, according to the latest First Time Buyer Tracker from Your Move and Reeds Rains.
There were 25,800 first-time buyer completions in September 2014, 11% more than 23,200 a year ago. New buyers are also paying more for their first home. The average first-time buyer purchase price rose 3% over the same period to
£150,950, the fourth consecutive month in which average purchase prices have topped £150,000.
Despite purchase prices rising, the average first-time buyer deposit fell 8% year-on-year from £28,498 twelve months ago to £26,134 in September 2014 - as Help to Buy made higher LTV lending more accessible for borrowers.

At the same time, deposits fell even faster as a proportion of annual income. The average first-time buyer deposit represented 67.6% of annual income in September, 12 percentage points lower than in September 2013.

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David Newnes, director of estate agents Your Move and Reeds Rains, comments: "Help to Buy has helped keep the blood pumping in the first-time buyer market over the last year, allowing borrowers struggling to save for a deposit the financial life support they need to purchase property.

"At the same time, MMR regulations have performed a health check on their finances, ensuring they will be able to withstand a future base rate rise. Lenders have increased the range of higher LTV options available to borrowers, allowing the average first-time buyer deposit to fall even as purchase prices increase.

"But the sands are shifting in the first-time buyer market. Loan-to-income caps announced in June have added further restrictions for lenders to factor in, on top of the tranche of regulations implemented in April. The effect is that lending is tied to wages much more tightly than in the past. Borrowers increasingly have to prove their financial resilience to access the higher LTV deals available. There is more lending, but at the same time it is more responsible and sustainable."

First-Time Buyer Affordability

SMALLER SEASONAL SLOWDOWN THAN LAST YEAR

On a monthly basis, first-time buyer transactions fell back 11%, though this was due to a seasonal fall between summer and autumn. In fact, the annual fall was less than last year: transactions fell 12% between August and September 2013.
Despite a slowdown in lending over the summer, the latest e.surv Mortgage Monitor revealed that house purchase approvals grew slightly in September, after three months of decline over the summer, hinting that the pause in the lending recovery is coming to a close. However, total approvals were still 2% lower than a year ago in September.
At the same time, lending to higher LTV borrowers remains strong, despite falling total approvals. There were 11,588 house purchase approvals to borrowers with a deposit worth 15% or less of the total value of their property in September, 1% more than in August 2014 and 45% more than September 2013. It was the second highest monthly number of higher LTV approvals since June 2008, with June 2014 the only month to outstrip September.

David Newnes, director of estate agents Your Move and Reeds Rains, continues: "The first-time buyer market has proved largely resilient to the wider cooling in the housing market over the last few months. While property price rises have begun to slow and total lending levels have also dipped, first-time buyer demand has kept a steady pace. There was a slight drop-off in activity in September, but this had less of an impact than the similar drop-off we saw last year.

"First-time buyers continue to be a key component of the engine powering the housing market recovery. Many worthy borrowers are only just seeing their finances recover after the financial crisis, and are now in a position to buy."

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REGIONAL DIFFERENCES

In London, the average purchase price for first-time buyers was £276,168 in Q3, £170,000 more than the average purchase price in Northern Ireland (£106,993) and £130,000 more than the UK average (£143,721).
First-time buyers in the capital also have the largest deposits on average - £75,774 in Q3 compared to the UK average of £26,078.

David Newnes, director of estate agents Your Move and Reeds Rains, concludes: "The heat is beginning to come off at the very top of the market in London as some foreign investors may be put off by strong sterling. But this hasn't mellowed demand for lower end properties in the capital. On the contrary, first-time buyer demand continues well. Increasing affordable housing stock in London over the next year is going to be essential if we are to prevent the housing shortage from turning into a bigger problem. Potential policies to help solve the problem will be closely watched in run-up to next year's election.

"There may also be a lesson to be learnt from Scotland, where a mansion tax has been proposed to raise funds to cut duty on affordable homes. While a mansion tax would have a big impact on the London market, revisiting the stamp duty slab structure is something that would actually help first-time buyers at the lower end, by removing some of the additional costs associated with buying properties. Even the cheapest homes in the capital are now mostly liable for stamp duty, which is adding an unnecessary extra burden to those trying to buy. Updating the thresholds would help to alleviate this."

SEE FULL REGIONAL MAP OVERLEAF

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Heat map of first-time buyer purchase prices

(Q3 2014)*

£220,000 +
£190,000 - £220,000
£160,000 - £190,000
£130,000 - £160,000
£100,000 - £130,000
Less than £100,000

*This is the total number of FTBs in Q3 2014. Based on CML regional data (released 27th August 2014) on the number of FTBs in Q2

- grossed up to reflect growth in FTBs recorded by LSL Property Services between Q2 2014 and Q3 2014.

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Examples of First-Time Buyer Properties**

North West

Scotland

North East

Two bedroom house

Bacup

£60,000

Two bedroom house

Perthshire

£84,000

Two bedroom house

Stanley

£22,000

Northern Ireland

Yorkshire & Humber

Three bedroom house

Carrickfergus

£53,500

Two bedroom apartment

Leeds

£29,950

West Midlands

East Midlands

One bedroom flat

Birmingham

£80,000

Two bedroom house

Glossop

£80,000

Wales

East Anglia

Two bedroom semi-detached house

Rhyl

£50,000

Two bedroom flat

Norwich

£90,000

South West

One bedroom flat

Exeter

£100,000

South East

Two bedroom flat

Egham

£164,950

London

Studio flat

Sidcup

£75,000

** Properties on the market with either Reeds Rains or Your Move estate agents at the time of going to press.

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Average

Purchase Price

E126,244

E130,624

E130,500

E132,500

E133,244

E135,000

E132,856

E132,571

E13 4,391

E137,405

E135,000

E135,000

E146,874

E123,750

E131,250

E137,494

E135,802

E137,438

E135,000

E135,000

E13 4,375

E137,063

E133,860

E132,813

E136,125

E135,802

E137,561

E146,250

E14 4,290

E146,790

E147,156

E146,605

E145,313

E150,898

LSL Property Servlces pie

Average

LTV

80.2%

80.5%

80.4%

80. 8%

81.1%

81.5%

81.7%

81.1%

79.9%

80.1%

80.3%

79.7%

79.9%

79. 9%

80.5%

80.4%

79. 9%

79. 5%

81. 3%

81. 3%

79.1%

79. 9%

79. 9%

79. 8%

80. 6%

80.4%

80.1%

79. 6%

79. 5%

80. 3%

80. 6%

81.1%

81. 3%

82.1%

Average

Deposit

E25,058

E25,455

E25,558

E25,381

E25,173

E2 4,929

E24,347

E25,051

E27,010

E27,394

E26,568

E27,377

E29,467

E2 4,853

E25,573

E26,918

E27,281

E28,172

E25,259

E25,271

E28,110

E27,541

E26,966

E26,876

E26,444

E26,623

E27,382

E29,845

E29,609

E28,916

E28,498

E27,719

E27,177

E26,968

Average lnitial Rate

5. 05%

5. 06%

5. 02%

5. 00%

4. 93%

4. 86%

4.72%

4. 47%

4. 33%

4. 36%

4. 39%

4. 44%

4.56%

4. 66%

4. 82%

4. 91%

4. 92%

4. 91%

4. 86%

4. 81%

4.72%

4. 60%

4. 44%

4. 33%

4. 29%

4. 24%

4.19%

4. 06%

3. 99%

3. 95%

3. 93%

3. 94%

3. 93%

4. 04%

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Tora Turton, The Wriglesworth Consultancy, mailto:v.turton@wriglesworth.comv.turton@wriglesworth.com, 020 7427 1445
Adam Kirby, The Wriglesworth Consultancy, mailto:a.kirby@wriglesworth.coma.kirby@wriglesworth.com, 020 7427 1440

LSL uses the extensive monthly data from registered first-time buyers in its estate agency brands Your Move and Reeds Rains to update the CML's first-time buyer data before the CML's RMS data is published. The term 'first-time buyer' is here denoted by the purpose of a buyer's registration, rather than their LTV. LSL LTV data has been applied to CML price purchase data to calculate deposit and affordability information. Sentiment and salary data are derived from a survey conducted by LSL. The figures are not mix or seasonally adjusted, and are subject to revision as more data becomes available.
This First Time Buyer Tracker has been prepared by The Wriglesworth Consultancy for LSL Property Services. It has been compiled using information extracted from LSL's management information. The copyright and all other intellectual property rights in the First Time Buyer Tracker belong to LSL. Reproduction in whole or part is not permitted unless an acknowledgement to LSL as the source is included. No modification is permitted without LSL's prior written consent.

Whilst care is taken in the compilation of the First Time Buyer Tracker, no representation or assurances are made as to its accuracy or completeness. LSL reserves the right to vary the methodology and to edit or discontinue the First Time Buyer Tracker in whole or in part at any time.

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