South East First Time Buyers prepared to pay 50% more for property than the rest of the UK
- In February, the average househunter was willing to pay 4.8x their household income for their new home, up from 4.2x in January as the peak Spring housebuying season gets nearer. Lower income groups are prepared to pay up to 6.1x their income for a property.
- While over 85% of UK househunters believe house prices will increase over the next twelve months, the average expectation of the increase has fallen to 6.9% from 7.2% in January following the strong reported January price gains and as February’s interest rate increase seemingly dampened expectations.
- First time buyers in London and the Home Counties are willing to pay far higher prices both absolutely (50% more) and relative to income than the rest of the UK. However they are more bearish on the outlook for their region’s house prices, expecting 6.3% for the next 12 months.
- The main reasons cited for the national optimism in order of popularity are:
- continued low interest rates
- the growth of buying property for investment (buy-to-let)
- confidence in the strength of the economy
- the increase in the number of households
- the fact that houses are still affordable relative to incomes
- Buy to Let investing is also more popular in London and the Home Counties with 18.5% of respondents considering buying for investment (buy-to-let) compared to 16.7% nationwide.
- In London and the Home Counties respondents were less bullish than the nation as a whole.
- 82.9% expect prices to rise this year in the region (Chart 4)
- Househunters forecast house price growth of 6.3% here
- In this region respondents cited the rapid growth in the population of as one of the top three factors explaining house price rises showing recognition that demographic factors are causing house price inflation.
- 25% of current UK househunters are first time buyers compared to 24% in January, still low by historic standards (of over 35%). In the South East the figure is slightly higher at 27.4%, still lower than the long run average, but reflecting the strong migration into the region.
- Migration and the trend to smaller but more numerous households are contributing to the shortage of property and hence the high prices first time buyers are prepared to pay in the South East. The region’s first time buyers are looking for property at an average price of £171,400 compared to the rest of Britain’s new nesters’ property budget of £114,600.
- The region’s first time buyers are older and richer than their counterparts in the rest of the country. The average age in the region is 31 compared to 29 elsewhere and the average household income is £38,400 compared to £27,400.
- First time buyers in the South East are paying 4.5x their household income to step on the property ladder compared to 4.2x for the rest of the country. This, combined with the survey’s finding that continued low interest rates is the top reason cited for confidence in the continued strength of the housing market, indicates that first time buyers are still finding property highly affordable.
David Lundholm, Managing Director of assertahome.com said:
“National confidence in the outlook for market is slightly more muted this month following strong house price increases reported in January, but optimism is still running high. Housebuyers clearly feel that the market is on a solid footing, despite the recent interest rate increases. As we approach the peak Spring housebuying season, they are looking at their finances and preparing to pay higher multiples of their income. But with interest rates still low, househunters are still finding property affordable.”
