First-time buyers are the first to opt out
Propertyfinder.com figures track the number of first-time buyers as a proportion of all home buyers. A year ago, one third of home buyers were getting on the housing ladder for the first time, now that figure has fallen to 22%, just over a fifth. Recent figures from the Council of Mortgage Lenders (CML) also show that the number of first-time buyers in the market is falling.
Nicholas Leeming, director of Propertyfinder.com, commented: “It is no wonder first-time buyers are holding off purchasing property – increases in the cost of borrowing most dramatically affect those without capital already invested in bricks and mortar. A typical first-time buyer today must pay £2,650 more in the first year in mortgage repayments and stamp duty than someone this time last year.
"Demand at the bottom end of the market is definitely calming, and there are signs that the rest of the market is following."
Sellers lose the upper hand as buyers offer less
Further up the housing market, there are signs that demand is waning. Despite sellers recently having been far more optimistic about house price growth than buyers, their expectations are becoming less confident. The balance between buyer and seller sentiment is showing signs of evening out.
Sellers have been more confident than buyers on the outlook for property prices in recent months and this is reflected in buyers’ offers. Buyers, frustrated by the shortage of property on the market (as those thinking of selling have held off putting homes on the market), have been offering above the asking price. But now, for the first time this year, buyers are beginning to offer below the asking price again by 2.3%. This is the lowest average offer since July last year – just before the Bank of England’s series of rate rises began.
Leeming continued: “The balance of power is a good indication of market conditions. The fact that demand has been far outstripping supply has meant that sellers have been confident in being able to achieve a price that is over the odds. However, as rates have risen, mortgage affordability has diminished and is preventing people from purchasing property. Previously demand has been driven by a hunger from the lower end of the scale to get onto the property ladder, but now first time buyers are holding off. Demand has cooled across the spectrum and buyers no longer feel they have to offer above asking price to secure their dream home. Sellers’ expectations have started to come back down to earth.”
Overall confidence in house prices dips
This month’s decision to hold off on another rate rise has done little to allay people’s fears over affordability. Despite overall confidence seeming to recover slightly last month, it has once again dipped - with buyers and sellers now expecting house prices to rise an average of 6.0% over the next twelve months, as compared to 6.4% in March.
Leeming concluded: “We seem to only now be experiencing the full effect of the Monetary Policy Committee's (MPC) actions. Spring is traditionally the time of year when we see the most activity in the housing market and we would expect consumer sentiment and housing data to be at its most positive. Instead the picture is now less optimistic. The Bank of England has done enough and the housing market is most definitely slowing. This is an orderly slowdown. Further rate rises are not needed.”
