Countrywide Quarterly Housing Market Review – Q4 2013

Countrywide plc

Monday, January 13, 2014

The proportion of first time buyers aged between 25 and 44 to increase 20% by 2023

The rise of the first-time buyer

In terms of age, first time buyers are becoming an increasingly homogenous group, according to research in Countrywide plc’s inaugural Countrywide Quarterly Market Review – Q4 2013.

Tenants who have not bought a property by the time they reach their early 40s will be increasingly unlikely to do so. Despite a growing number of people working beyond the age of 70, the deposit required by a first time buyer to purchase a property has doubled every six years since the mid-1980s and is on course to do so again. As the UK’s largest integrated property services group, Countrywide plc sees firsthand how difficult it is becoming for people to save for an ever increasing deposit while renting for progressively longer periods of time.

At the same time, the recovery in mortgage lending coupled with low interest rates has improved the position of first time buyers as a result of lower deposit requirement and growth in higher loan to value lending. Despite buying more expensive property, in cash terms an average first time buyer in England put down a £39,000 deposit in Q3 2013, a decrease of 22% from 2010.

Commenting on the findings Grenville Turner, Chief Executive, Countrywide plc, said: 

“We expect the proportion of buyers aged between 25 and 44 to grow to encompass 87% of all first time buyers by 2023, up from 67% in 2003. The number of first time buyers aged 25 and under is expected to fall by a third due to increased levels of student debt and a greater proportion of younger people renting. Despite this, we still expect that 1 in 10 first time buyers in 2023 will be aged 25 and under and supported in the main by the Bank of Mum and Dad.” [See Appendix A]

The impact of Funding for Lending

The refocus of the Funding for Lending Scheme (FLS) away from residential mortgage lending towards businesses has led some to question whether first time buyers will continue to see the improved access to lending they have enjoyed. Data from the Council of Mortgage Lenders shows that the number of mortgages secured by first time buyers across the UK increased by a third in the 15 months FLS has operated.

Over the course of FLS (Q3 2012 to Q4 2013) the proportion of mortgages made to first time buyers with a deposit of 10% or less jumped from 33% to 38%. Lending to first time buyers with a 5% deposit doubled, although this still forms only a small proportion of lending. In Q4 2013, 3.6% of lending to first time buyers went to those with a 5% deposit.

Confidence has grown amongst house builders and this has translated into 24% more new homes being built over the past 15 months – the highest level since 2007. Despite the introduction of the Help to Buy Mortgage Indemnity Scheme it remains to be seen whether first time buyers with smaller deposits will continue to enjoy record low mortgage rates from February 2014 when FLS ends.  [See Appendix B and C]

Increased housing supply and demand

In November 2013, housing transactions increased in the North and the South of England by 10% and 26% respectively when compared to the same period in 2012. Across the country, a record number of new buyers are entering the housing market as levels of mortgage lending have increased. Q4 2013 saw the ratio of new buyers to sellers reach the highest level since 2008, at 9.7 new buyers for each new seller.  Despite high demand from buyers, the lettings market has remained strong with an average of 10.4 prospective tenants per new property in Q4 2013. [See Appendix D]

Growth in the new-build market

Between 2004 and 2013 the proportion of new population growth in London and the South East has jumped from 25% to 45%. House builders have followed employment and population growth and 36% of all new build properties are now either built in London or the South East, up from 26% in 2000. 

Since 2008, house builders have concentrated new build activity in London with the number of new build developments at 68% of peak 2005 levels and 81% of 2008 pre-crash levels. In the South West of England it is 57% of peak levels and in the South East 55% of peak levels. At the other end of the country new starts in the East Midlands are at 36% of peak levels, whilst Yorkshire and the Humber fare a little better with new starts at 39% of peak levels. (Source: DCLG)

Increasing the supply of new build property is particularly important to first time buyers who account for 50% of all mortgage lending on new build property in England. In the most expensive regions such as London, 62% of mortgage lending on new property goes to first time buyers. [See Appendix E]

Commenting Grenville Turner, CEO, Countrywide plc, said:

“First time buyers are the main drivers of movement in the property market so it is good to see this group of buyers return in larger numbers.  The government backed Help to Buy scheme is helping many would be homeowners to get onto the housing ladder. However, by 2017 the scheme is likely to become irrelevant as normal housing market conditions resume and take over.

“In 2014, we expect to see double digit growth in number of home movers as they play a bigger part in the movement of the housing market. The natural flow of first time buyers into the market will help second and third time buyers move up the housing ladder. This is welcome news for the wider UK economy as new homeowners typically spend money on DIY, fixtures and fittings when they move into a new home.

“We predict 5% growth in house prices in 2014 due to the ripple effect outwards from Prime Central London. Housing transactions are recovering and although we expect a slight reduction in the long terms average, housing transactions will peak around 1million to 1.1million transactions per year, due mainly to the changing dynamics of the housing market and growth in the rental sector.


Appendix A - The change in the age of first-time buyers over a 30-year period  The Change In The Age Of First -time Buyers Over A 30-year Period

Source: Countrywide plc

Apprendix B

UK Loans To FTB's

Source: CML 2013

Appendix C

First Time Buyers Borrowing With Smaller Deposits

Appendix D

New Buyers To Sellers And New Tenants To Landlords

Appendix E

Proportion Or Total Population Growth And House Building In London And South East

Source: Countrywide plc

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