The Government should introduce a permanent replacement to its Help to Buy scheme to enable more people to get on to the property ladder, a report claimed today.
Mortgage insurer Genworth estimates that up to two million people who would like to have bought their first home since 2007 may not have been able to do so.
The group blamed the situation on the introduction of tougher mortgage regulations and greater capital requirements for lenders.
It said since new regulations were introduced in 2008 and 2009, there had been a dramatic reduction in high loan-to-value mortgages, while those that remained had become more expensive.
But it said the situation could be improved by introducing a mortgage insurance scheme to help lenders spread the risk of high loan-to-value loans.
The group found that someone buying a home costing £147,000 with a 75 per cent loan-to-value two year fixed rate mortgage would pay £496 a month, but someone buying the same property with a 95 per cent loan-to-value loan would face repayments of £843.
But it said a system of mortgage insurance for high loan-to-value loans could help to keep mortgages for people with small deposits affordable by transferring some of the risk away from lenders, while it would also protect the safety of the financial system.
Simon Crone, vice president for mortgage insurance (Europe) at Genworth, said: “The scale of frustrated demand is growing larger by the day.
“Help to Buy must become a precursor to a permanent system where mortgage insurance for high loan-to-value loans – backed by capital relief – plays an ongoing role in helping first time buyers access the market, ensuring a sustainable rise in house building and protecting the safety of lenders and the financial system.”
The group used government and industry data to compare the number of people entering the housing market with expected demand.
It found that the number of people buying their first home was consistent at 10.26 million a year between 1985 and 2006, only slightly below the figure of 10.29 million, which would be expected based on population trends.
But it said since 2007 there had been a large and persistent deficit in first-time buyer numbers.
It estimates between 2007 and 2013 1.8 million people who would have hoped to buy their first home have been unable to do so.
It added that although the Government’s Help to Buy scheme had helped, nearly half of people who were expected to want to buy a home during 2014 were still unlikely to be able to do so.
Based on figures for the first six months of 2014, Genworth estimates there will be 296,200 first time buyers during the year as a whole, despite demographic trends suggesting more than 500,000 people would like to get on to the property ladder in 2014.
Homebuyers wanting to live close to a popular station can expect to pay an extra £42,000, research claims.
Adding £42,000 to their budget means buyers can afford to include properties that are just 500 metres from a London station in their search, compared to an otherwise identical property 1,500 metres away.
The findings by Nationwide Building Society were based on a typical London home.
It also suggested the premium on a typical property in Manchester that is 500 metres from a station is £12,000, while in Glasgow it is £9,400.
Robert Gardner, Nationwide’s chief economist, said: “London homebuyers’ willingness to pay a greater premium for being close to a station compared with those in Greater Manchester and Glasgow probably reflects the greater reliance on public transport in the capital, with residents less likely to drive.”
The research found London has the densest network of stations and services, with 94 per cent of properties within 1.5 kilometres of a station, compared with 72 per cent in greater Glasgow and 69 per cent in greater Manchester.
Homebuyers can find properties that are within commutable distance of their work with the help of Zoopla’s travel time search tool.
You can discover which locations are within your preferred commute time from work. For example, if you work near Waterloo Station, you can search for properties for sale or to rent that are within a certain travel time from there.
The research comes as the building society also unveiled an increase in house price growth in August, with property prices rising by 0.8 per cent.
The annual rate of house price inflation also increased during the month, rising to 11 per cent, up from 10.6 per cent in the 12 months to the end of July.
The latest monthly gain, which followed a change of just 0.2 per cent in July, left the typical home costing £189,306.
The acceleration in price growth is at odds with recent reports that the property market was beginning to slow down as more homes were put up for sale and buyers stayed away from the market.
Gardner said: “The outlook for the housing market remains highly uncertain.
“The number of mortgage approvals fell by almost 20 per cent between January and May, suggesting that activity was cooling.
“However, there was a modest rebound in June and it is unclear how much of the slowdown was due to the introduction of the Mortgage Market Review rather than an underlying loss of momentum.”
He said surveyors had reported that inquiries from new buyers had moderated in recent months.
But he added that the brightening economic outlook was likely to provide ongoing support for housing demand, while supply remained constrained, despite more homes being put up for sale.
Meanwhile, the first increase to the Bank Rate is not expected until early 2015, despite the fact that two members of the Bank of England’s Monetary Policy Committee voted for a hike at the most recent meeting.
The Nationwide figures come just days after the National Association of Estate Agents reported a steep drop in the number of people submitting above asking price offers in a bid to secure a home.
The group said only 4 per cent of homes sold for more than the asking price in July, down from 19 per cent in May, while 66 per cent of sales were agreed for offers below the asking price last month.
It added that the number of homes being put up for sale had increased during July at its fastest rate for nearly three years.
Gardner said house price inflation was continuing to outpace earnings growth by a significant margin, with average wage increases running at less than 1 per cent in recent months.
But despite this situation, he said affordability at a national level did not appear stretched by historic standards, partly due to low mortgage rates, which have left the cost of servicing a home loan close to the long-run average of around 30 per cent of take home pay.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “August proved to be a decent month for the housing market, even though it is traditionally a quiet time of year when not much gets done.
“Prices continued to edge up slightly, while we had one of our best months for new business – emphasising the continued strength of the London property market in particular.
“While borrowers may be worried about an interest rate rise, there are plenty of excellent rates still available which will continue to support activity in the market to an extent.”
Which are the most popular properties in August so far? With asking prices from less than £164,950 to almost £65m and located in a variety of places – from Plymouth to North Yorkshire – here are the most viewed properties on Zoopla.
1. The humble bungalow reigns supreme this month, with a three bedroom version topping the most viewed chart. The £164,950 property in Leicester is ‘an ideal investment opportunity’ according to estate agents Leicester Premier, which is handling the sale.
2. This four bedroom home has an asking price of less than £450,000. It can be found in a small town within commuting distance of Plymouth.
3. With possibly the most unforgettable address, this building is equally unique and has the potential to be a stunning Grand Design. The property is at Number 1, The Thames, in Sheerness and is currently on the market for £500,000.
4. As well as seven bedrooms, this gated property close to Hampstead Village includes a cinema room, indoor and outdoor swimming pools, garages for three to four cars, and a separate staff flat on the lower ground floor. It has an asking price of £46.5m.
5. This three bedroom luxury apartment in the heart of Royal Greenwich boasts three bedrooms and three bathrooms, and covers a floor space of 909 sq ft. It has an asking price of £580,000.
6. If you would like to live in a modern mansion north of Birmingham, this six bedroom property fits the bill. It boasts solid oak and natural stone finishes throughout, zoned underfloor heating and landscaped gardens.
7. This five bedroom apartment at London’s iconic One Hyde Park has an asking price of £64,999,950. The accommodation spans an entire floor and boasts views of both Knightsbridge and Hyde Park.
8. Diversity is at the heart of this £659,000 detached property in North Yorkshire. It can be used as a five bedroom house, a successful B&B with separate owners accommodation or it could be converted to a three bedroom property with an adjoining two bedroom cottage that would be ideal for relatives.
9. A nine bedroom detached house in London’s Kensington is being offered (POA) with full planning permission to build a separate cottage, tennis court and garden pavilion.
10. This newly built ambassadorial-style and stucco-fronted London home has 11 bedrooms and is spread over five floors – including a lower ground and basement.
The number of homes for sale rose at its fastest rate for nearly three years in July as market conditions swung in favour of buyers, research showed today.
Sellers are increasingly having to accept less than their asking price as some of the heat comes out of the booming property market, according to the National Association of Estate Agents.
The average number of properties estate agents had on their books increased by 11 per cent during the month to stand at 51.
Competition among potential buyers also eased in July, as the number of house hunters registered with estate agents fell for the fourth consecutive month.
Overall, around 368 people were registered as buyers per estate agent branch, down from 371 in June.
But despite the fall, the number of potential buyers was still significantly higher than it had been in July 2013, when estate agents had an average of just 250 house hunters on their books.
The combination of more homes being on the market and fewer buyers chasing them has helped to ease the previous mismatch between supply and demand, which had been forcing prices higher.
The NAEA said 66 per cent of sales agreed during July were for less than the asking price, a sharp turnaround from May when just 46 per cent of below asking price offers were accepted.
Even more significantly, only 4 per cent of homes sold for more than the asking price in July, down from 19 per cent in May when buyers were outbidding each other in a bid to secure a home.
Despite the fall in buyers, sales levels remained static during July at an average of nine per branch.
There was also no change in the number of people getting on to the property ladder, with first time buyers accounting for 20 per cent of sales, the same proportion as in June.
Mark Hayward, managing director of the NAEA, said: “The lack of housing supply has been a significant issue over the last few months, so the sign of increasing stock is positive for the market and house buyers in search of their ideal home.
“Another positive for house hunters are the recent reports suggesting house prices are on the decline; our NAEA report has found similar, with a significant amount of homes being sold at less than the asking price.”
The group warned that the fall in potential buyers may in part have been driven by the high Stamp Duty bills many people now faced.
It said 90 per cent of its members said Stamp Duty either frequently or occasionally deterred buyers from moving, while 92 per cent thought the Government should reform the tax.
Meanwhile, research by Knight Frank found that northern cities offer young professionals the best chance of getting on to the property ladder, despite the fact that people working in them generally had lower salaries.
The group, which looked at affordability by comparing regional house prices to local average earnings for 22 to 39 year olds, found that Durham was the most affordable city in which to buy a home.
Property values in the city average just £81,774, while pay for young people was around £24,484, giving a house price to earnings ratio of 3.3.
It was followed by Nottingham at 3.4, Liverpool at 3.6 and Manchester at 3.7, with Bradford completing the top five most affordable cities.
Hastings and Canterbury were the most affordable cities in the South for young professionals to buy a home in, both with house price to earnings ratios of 6.8.
Unsurprisingly, London was the least affordable place for young people to buy a home, despite having the highest salaries of £40,279.
But with property values in the capital averaging £437,608, people faced a house price to earnings ratio of 10.9.
It was where the Duchess of Cornwall spent her schooldays at Marlborough College and, from adorable country villages to smart market towns, Wiltshire is a county with everything going from it.
Its proximity to London via the M4 means that prices in the east can be high, elevated by commuters, but the further west you cast your house hunting net the more likely you are to find a property bargain.
In the last 12 months, average prices in Wiltshire have begun slowly rising. They have now topped the £250,000 Stamp Duty threshold to stand at £263,705, up 6.39 per cent year on year.
Wiltshire is where Sting and Trudie Styler have their country estate, in the Woodford Valley, just north of the cathedral city of Salisbury. While most of us will sadly not be on the market for a Grade I listed Elizabethan pile there are some lovely stone and thatched cottages in the villages within the valley to settle for. “It is utterly gorgeous countryside,” said Andrew Rome, a partner at Knight Frank.
The most sought after villages in the valley include Great Durnford, notable for its mellow pink brick cottages, where a chocolate box three bedroom cottage with views across the valley would cost in the region of £600,000. Another good choice is Middle Woodford which has its own primary school, rated “outstanding” by Ofsted.
A little further west is the presently slightly unremarkable market town of Chippenham. However, when electrification of the Great Western Railway is completed in 2017 it will cut train services from Chippenham to the capital to around an hour and it is forecast that prices could rise by as much as 20 per cent as a result.
At present, you could buy a two bedroom flat for around £120,000 or a four bedroom family house (modern or period) for between £300,000 and £400,000.
Caroline Dobson, of Chappell & Matthews, is a Chippenham resident herself. “It is a typical historic market town, with a market square and some listed buildings around it,” she said “It is a nice place to live, there are some good independent restaurants and every May there is an International Folk Festival, which really brings a lot of people.
“It is perfectly placed between Swindon, Bath and Bristol, and a lot of people come here because they don’t’ want to pay Bath prices.”
Chippenham also has some lovely satellite villages most notably Castle Combe, six miles to the north west, which director Stephen Spielberg chose as the quintessential English village location for War Horse. “It is very quaint and olde worlde,” said Chris Scothern, of Atwell Martin estate agents.
The downsides of this are twofold. Prices are high and, warns Scothern, if you do spend circa £500,000 on a two bedroom character cottage in Castle Combe you might find tourists peeping through your windows.
A more pocket friendly option is Kington Langley, three miles north of Chippenham, which is around half the price of its more pretty rival. “It is a great village,” said Scothern. “Why is it so much cheaper? It is more of a mixed area, I suppose, and Castle Combe has just become really, really popular over the years.”
1. Traditionalists will ooh and aah over this two bedroom stone cottage in the heart of Castle Combe, on the market at £485,000.
2. But you do get more for your money in nearby Kington Langley, like this four bedroom house for £575,000.
3. Homes in Chippenham, like this four bedroom terrace for sale at £399,950, are tipped for major price growth thanks to faster train services to London from 2017
4. Buy a home in the Woodford Valley and you can count Sting among your neighbours. This five bedroom house in Little Durnford is for sale at £1.275m.
5. This historic four bedroom cottage in Marlborough has lashings of character, and is on the market at £525,000.