Assetz® News - First-time buyers returning to property market

First-time buyers returning to property market

16th January 2006 |

The steady decline in the number of first-time buyers in the property market has been a long-term cause for concern, but new figures suggest that the trend has been halted.

According to the December survey from propertyfinder.com, there has been a re-awakening of first-time buyer interest in recent weeks and the early signs are good for property investors in the UK.

In September 2005, only 25 per cent of those searching for property classed themselves as first-time buyers. This compares to the long run average of 46.1 per cent, reflecting the lack of confidence held by those wanting to get a foot on the property ladder in recent years.

At the beginning of this year, however, the figure had risen significantly to 37 per cent. Although this is still short of the long run average, the leap from September's figure is undeniably encouraging and it bodes well for the general health of the property market.

In recent years, first-time buyers have found that difficulties financing mortgage repayments, council tax, heating costs and conveyance have all added to the basic problem of funding the purchase. Jim Buckle, chief executive of propertyfinder.com, suggests that these fears have started to ease.

"The fact that more first-time buyers are returning to search for property is a very positive sign of a healthy balance returning to the housing market," said Mr Buckle.

"The numbers are still below the long run average, but it is encouraging to see more people gaining the confidence to take their first step on to the housing ladder," he added.

In recent weeks, several surveys have reflected a marked increase in confidence in the property market, while property investors have generally predicted that they will expand their portfolios during the course of the year. Buy-to-let landlords are also expecting a strong 2006 with almost two thirds of investors looking to buy new properties, according to the ARLA review.

The confidence seems to have stemmed from the basic stability of the UK housing market, which has reached a plateau following unsubstantiated fears of a crash. Significantly, the confidence has filtered through to first-time buyers and Mr Buckle expects the trend to continue throughout 2006.

"There is no reason to expect a return to the boom days for the housing market, but we don't see any need to fear a bust. The combination of strong confidence and rising numbers of first-time buyers should enable transactions to continue their recovery. For the first time in years we can look forward to a rational, steady housing market," he said.

The rising number of first-time buyers has partially been attributed to an oversupply of smaller properties. Propertyfinder.com found that 41 per cent of the UK's housing stock has two bedrooms. With only 21 per cent of house hunters looking for a property of this size, there is a clear disparity which has led to more reasonable prices on smaller properties.

The gradual reintegration of first-time buyers has not corresponded with a slump in overall house prices, however, with the government announcing today that house price inflation increased to 2.5 per cent in the year to November from a nine-year low of 1.8 per cent in October.

Furthermore, rightmove.com recorded that the average asking price on a home had climbed by 0.1 per cent from early December to early January, as the UK property market becomes increasingly strong and property investors look forward to a profitable year.