First-time buyers squeezed out as deposit costs rise
- May sees 22,200 first-time buyer (FTB) transactions as sales drop 18.1% compared to 27,100 last year
- This makes May 2015 the lowest May for first-time buyer transactions in three years
- Average first-time buyer deposit climbs 4.2% year-on-year to £25,134 as purchase prices rise
- Comes despite rock bottom average mortgage rates and repayments falling as a proportion of income
This year (2015) witnessed the lowest May for first-time buyer completions in three years as the election temporarily stalled the market and deposits costs climbed, according to the latest First-Time Buyer Tracker from Reeds Rains.
The number of first-time buyers completing property transactions in May has fallen by over 18% compared to the same time last year. There were 22,000 transactions in May 2015, 18.1% lower than May 2014’s figure of 27,100.
May’s figure is 0.9% lower than April’s figure of 22,400 first-time buyer completions. May did see significantly more sales than three months ago (+16.2%), but February’s figure of 19,100 represents a seasonally quiet time of year.
On top of the uncertainty surrounding the election, first-time buyers are facing the need for growing deposits both in real and relative terms. As of May, the average deposit for a first-time buyer stands at £25,134, up 1.7% on the previous month and 4.2% on a year ago. Moreover, the average deposit as a proportion of income is on the rise for the first time house price over the same period was £201,292. Nationally, the average price for a first-time home stood at £155,356 in the three months to May 2015. The North East and Northern Ireland are the least expensive regions for first-time buyer properties, with average prices standing at £112,388 and £107,906 respectively.
On average, Londoners put down a deposit of £69,040 in the three months to May 2015 – more than five times the size of the average first-time buyer deposit in the North East (£13,283). Despite having the second-highest average purchase price, the South East only possessed the fifth-largest average deposit cost. The East of England is the region with the second-largest deposit, coming in at an average of £49,135 in the three months to May 2015. First-time buyers in Wales need the third-largest deposit (£27,668), despite being one of the less expensive areas in the country for first-time buyers.
Adrian Gill, director of estate agents Reeds Rains, comments: “Despite record-low mortgage rates, a growing economy and the start of significant wage growth, the uncertainty surrounding the election seems to have triumphed, albeit momentarily. Many pundits predicted a hung parliament, and this political confusion seems to have caused many would-be first-time buyers to keep their powder dry in the run-up to May – until it became clear what the government was and what its housing policies were going to be.
“A second and more permanent root to the disappointing first-time buyer figures is the challenge of cultivating a deposit. Many first-time buyers are still on tight monthly incomes, struggling to save while savings rates stay so low. Meanwhile, deposits are rising primarily as property prices continue their seemingly unstoppable upwards march. This is wholly due to a lack of housing supply versus a stack of housing demand. If we want to see property prices stabilise and deposits fall as proportions of income, the Government must address the housing supply problem, for which there is only one solution: build more homes.”