The number of people taking their first step on to the property ladder hit a seven-year high in July, research showed today.
A total of 30,000 first time buyers bought a home during the month, the highest level since August 2007 and 25 per cent more than in July 2013, according to LSL Property Services.
There was also a 10 per cent drop in the amount first time buyers put down, with deposits falling to £26,642, £3,000 less than a year earlier.
The Government’s Help to Buy scheme continued to have an impact on the proportion of a property’s value that lenders were prepared to advance, with average loan to value ratios rising to 82.9 per cent, compared with 79.5 per cent in July 2013.
But it was not all good news for people taking their first step on to the property ladder, with the typical mortgage rate they secured rising for the fourth consecutive month, increasing to 4.19 per cent, up from 3.99 per cent in March.
This higher rate also led to the size of mortgage repayments as a proportion of income growing to 22.6 per cent, compared with 20.2 per cent a year ago.
People typically spent £155,844 on their first home, 8 per cent more than the average amount paid a year earlier.
Despite the drop in the average deposit put down by first time buyers, people still needed to save the equivalent of 72 per cent of their annual pay towards their first home.
But this figure was down from 82.6 per cent of earnings in July 2013, also reflecting the fact that the average salary of people buying their first home had risen to £37,000 from £35,843 a year earlier.
David Newnes, director of estate agents Your Move and Reeds Rains, part of LSL Property Services, said: “The first-time buyer market is still active, even as the wider property market is starting to show signs of cooling down.
“As the economic recovery gathers momentum, more buyers are finding themselves in a position where they can afford to own their own home.”
He said a whole generation of first-time buyers had found themselves stuck on the side-lines of the property market as the economy recovered from the recession and real wages fell.
But he added: “The recent increase in high loan-to-value lending options – enabled by Help to Buy – has allowed them a shot at getting on the ladder at long last, and the number of first time buyers has climbed to a seven year high.”
Strong house price growth seen in recent months has pushed the average price paid for a first home above the £150,000 barrier in London, the South East, East, South West and Wales.
Unsurprisingly, London was the most expensive place in which to buy a first property at an average of £251,061, followed by the South East at £194,955.
At the other end of the spectrum, Northern Ireland and Yorkshire and Humber had the cheapest properties at an average of £89,470 and £103,741 respectively.
First time buyers in London typically saved £62,253 for a deposit, nearly six times more than the £10,710 put down by people getting on to the property ladder in the North East.
Property transactions slumped in July as the housing market continued to show signs of cooling, Government figures revealed today.
A total of 101,190 homes valued at more than £40,000 changed hands during the month on a seasonally adjusted basis, 1.3 per cent fewer than in June and the lowest level since December 2013.
But despite the dip, sales levels were still 13.5 per cent higher than they had been in July 2013, according to HM Revenue and Customs.
The figures add to growing evidence that the property market is beginning to slow down, as buyers balk at the high prices being demanded by sellers.
The introduction of the Mortgage Market Review is also thought to have contributed to the fall in sales, as the new rules, which include stricter affordability criteria, have lengthened the mortgage application process.
House price gains also appear to be moderating, with Nationwide Building Society reporting that property values remained largely unchanged in July, rising by just 0.1 per cent.
In its latest Agents’ Summary of Business Conditions, which was released yesterday, the Bank of England also said housing transactions had eased in recent months.
It added that house price growth was slowing in the South, with some areas seeing price falls, while there were fewer cases of sealed bids and people making offers over the asking price, as some of the heat came out of the market.
But despite evidence that the housing market is slowing in the South, there are also suggestions that price growth is accelerating in other areas, as the recovery ripples out across the country.
Meanwhile, separate figures released today showed that the number of new homes started by builders rose by just 0.3 per cent during the second quarter of the year, well down on the 10.7 per cent jump recorded during the previous quarter.
But the total of 36,200 new homes started during the three months was still nearly 24 per cent higher than during the same period of 2013, according to the department of Communities and Local Government.
The increase was driven by a rise in private housing starts, which were up 1.6 per cent at 29,900.
New properties started by housing associations and local authorities fell by 5.6 per cent.
Paul Diggle, property economist at Capital Economics, said: “The marginal gain in housing starts in the second quarter suggests that material and labour shortages are constraining housebuilders’ output.
“Despite the impetus from the Help to Buy equity loan scheme and favourable wider economic conditions, these constraints will keep a lid on housebuilding for a while yet.”
A baby born today faces the prospect of paying £3.4m for their first property, new research has suggested.
The alarming statistic comes on the back of recent double digit house price rises that have forced first time buyers to turn to the Bank of Mum and Dad to help with a deposit.
The calculation is based on the average house rising in value by 8.6 per cent during the past 60 years.
If this pattern continues, a typical house worth just over £200,000 today is expected to reach £3,391,474 in the year 2048, the year when a child born today reaches a typical first time buyer age of 35.
The research by online estate agents eMoov also suggested that even a child who is 10 years old today faces paying more than £1.6m for a property, requiring a deposit of more than £320,000.
And if you have a child who is currently 4 years old, they will most likely need £2.4m.
By 2032, the average deposit of 20 per cent will be the equivalent of the price of the average price of a property today.
Russell Quirk, eMoov’s chief executive, said: “Our research shows the staggering truth about the rise of property prices within Britain in recent times. Property prices are always on the move, but viewed over decades our research shows an annual rise of 8.6 per cent since 1954.
“If the trend continues then the bank of Mum and Dad will become even more important for the next generation of home owners”
Mortgage experts agree that parents will play a more pivotal role in helping their children onto the property ladder.
Mark Harris, of mortgage brokers SPF Private Clients, said: “Already the Bank of Mum and Dad has become essential in helping first-time buyers onto the housing ladder and this research suggests that their role will become even more crucial.
“With wages failing to keep pace with property prices, home ownership is only going to become more unaffordable unless Mum and Dad come to the rescue with a hefty deposit.”
Mortgage lending jumped to a six-year high in July as the market remained resilient in the face of regulatory change, figures showed today.
A total of £19.1bn was advanced during the month, 7 per cent more than in June and the highest figure since August 2008, according to the Council of Mortgage Lenders.
The group said mortgage activity appeared to have remained robust, despite the tough new affordability criteria introduced under the Mortgage Market Review earlier this year.
But it cautioned that the eventual impact of the regulatory change remained uncertain.
July was the third consecutive month during which lending levels have increased, following a slight dip in March ahead of the introduction of the MMR.
Caroline Offord, CML market and data analyst, said: “Property transactions in the first half of the year showed a 25 per cent increase compared to the same period a year ago, but we expect that intensifying affordability pressures could start to dampen this upwards trend.”
The figures came as minutes from the Bank of England’s Monetary Policy Committee suggested a hike in interest rates could be closer than previously expected.
The minutes showed that two members of the committee vote to raise the Bank Rate from its current record low of 0.5 per cent to 0.75 per cent in August.
It was the first time that the MPC has been split on what the official cost of borrowing should be since July 2011.
External MPC members Martin Weale and Ian McCafferty argued that although wage growth remained weak, it was a lagging indicator of the amount of slack there was in the economy, and rates should begin rising before that slack had been used up.
News of the vote prompted speculation that interest rates could start rising before the end of the year.
But Samuel Tombs, senior UK economist at Capital Economics, pointed out that data released since the MPC’s meeting showing a fall in inflation to 1.6 per cent in July and slower growth in employment, eased the pressure on the Committee to raise rates quickly.
He said: “We still expect the first hike to come in February 2015.
“But, even if the Committee decides to get on the front foot and raise interest rates before the end of the year, low inflation should ensure that the pace at which they rise is extremely gradual by historical standards.”
A 0.25 per cent increase in interest rates would add just over £20 a month to repayments on a £150,000 variable rate mortgage, which moves up and down in line with changes to the Bank Rate.
Meanwhile, the Bank of England’s Agent’s Summary of Business Conditions, also released today, built on previous indications that the housing market is beginning to slow down.
The report said housing transactions had eased in recent months due to a shortage of homes on the market and the introduction of the MMR, which had lengthened the mortgage application process.
It added that there were also signs of an easing in house price inflation, concentrated in the South, with some prices lower than they had been a year earlier, while there were also fewer cases of sealed bids and offers being made over the asking price.
But recent survey data has pointed to a slowdown in growth as more homes have been put on the market and buyers have started to bulk at high asking prices.
Nationwide Building Society said property values inched ahead by just 0.1 per cent in July, while surveyors questioned by the Royal Institution of Chartered Surveyors predicted prices in London, which has been the driving force of the market recovery, would rise by just 1.9 per cent during the coming 12 months.
If you’re looking for a new build home, try this mix of studios, one, two and three bedroom apartments in the heart of cultural York.
Where exactly is it? Just south east of the city centre, half a mile from York Minster, and within the ancient city walls.
Monster housing estate or tiny boutique development? By central York’s standards this is an absolute giant, covering a four hectare site. The current, second, phase of the scheme by developer Lend Lease includes 193 homes, which go on sale this month. It will, ultimately, have more than 700 homes.
How much will it cost me? Studios start at £115,000, one bedroom homes are priced from £140,000, two bedroom flats from £230,000 and three bedroom apartments start at £375,000.
What is so great about it? Location, location, location. You are 10 minutes’ walk from the city centre and all it has to offer. The site, beside the River Fosse, is pretty and the development has a private courtyard for residents, as well as landscaped gardens. “It is very unusual to be able to live in a community like this within the city walls,” says Tania Coffey, association director of Savills and the selling agent.
Surely its not completely perfect? The homes are being sold off plan and won’t be ready until August 2016, and the prices are quite punchy. “This is a really prime development,” says Coffey. Buyers attracted to the development for its lock up and leavability will also need to factor in annual service charges ranging from £900 for a studio to £1,400 for a two bedroom flat.
Who will my neighbours be? Coffey expects the smaller homes to attract investors, while the larger properties will appeal to downsizers wanting an urban home. “We also get a lot of second home buyers in York,” she said. “They want to be in the city centre, but also to be close to the Yorkshire Moors and Dales.” Wealthy parents may also buy flats at Hungate for students studying at York University.”
What is York city centre like? A great place to live with the buzz that university cities tend to have and a fantastic choice of cafes, shops, restaurants, bars and theatres on the doorstep.
Is it any good for kids? Coffey suspects most Hungate residents will either be at a pre-parental phase of life or will have older children who have flown the nest. However, second home owners with teenagers will be perfectly at home with all of York’s shops, cafes and nightlife within walking distance.
How are the public transport links? The city centre is brilliantly walkable and the development is just under a mile from York Railway Station, with direct services to Leeds, Newcastle, Edinburgh, Peterborough and London.
Is it up and coming? North Yorkshire took a battering during the downturn, but York seems to be well on its way back up, with average prices up 3.87 per cent in the last year to an average £245,556.
“It has gone mad,” agrees Coffey. “There is a real shortage of stock and a lot of competition for the right properties. Homes near to good schools or near the station and the city centre are the real drivers.”
I like the sound of York what else is on sale there?
1. Take on a two bedroom wing of a very impressive Grade II listed mansion, which is two miles from the city centre, for £475,000.
2. York city centre has streets of quality period houses like this three bedroom end of terrace house, on the market for £395,000.
3. If you want to live beside one of the city’s waterways then how about this two bedroom warehouse conversion, on the market for £240,000.
4. Or slip beneath the £125,000 Stamp Duty threshold with a one bedroom flat above a shop right in the city centre, on the market at £119,950.