There’s a window of opportunity for first time buyers to get onto the housing ladder this year, as buy-to-let landlords hold back from purchasing more properties, reports Rightmove.
The latest House Price Index from the property portal shows a steady start to the year. The monthly increase in the price of homes coming onto the market, at 0.4%, is very similar to the 0.5% rise recorded in January last year.
Early indicators of housing demand also appear robust, with Rightmove traffic up by 5% compared to a year ago. This increase in search activity is notable, claims the portal, given that a year ago, market activity was buoyed by the November 2015 announcement that second home and buy-to-let Stamp Duty would be raised from April 2016.
With this year having no such dynamic, there is a New Year window of opportunity for first time buyers to fill the void left by buy-to-let landlords, insists the firm.
The Director and Housing Market Analyst at Rightmove, Miles Shipside, comments on the data: “The 0.4% monthly and 3.2% year-on-year price increases are indicators of the continued market momentum from the autumn. Demand for a suitable home is such that visits to the Rightmove website are still up by 5% year-on-year, despite being compared to a period that was boosted by high demand from buy-to-let investors rushing to beat the Stamp Duty deadline. Year-on-year comparisons for transactions in the first quarter of 2017 should also allow for the distortion of last April’s additional Stamp Duty tax deadline, as transactions were up 40% in the first quarter last year.”
First time buyers will benefit from more choice and negotiating power this year, believes Shipside.
Window of Opportunity for First Time Buyers as Landlords Hold Back
With markedly fewer buy-to-let purchasers than this time last year, the number of sales agreed in the typical first time buyer sector – two bedrooms or less – was down by 13.2% in December compared to the same month in 2015 (although sales agreed in this sector were still up by 0.8% when compared with December 2014, which was not distorted by the buy-to-let rush).
As a result, available stock for sale in this sector is up by 1.9% on last year, offering more choice for first time buyers. This contrasts to the same period a year ago, when available stock plummeted by 18%, as active buy-to-let purchasers reduced choice and limited buyers’ ability to negotiate.
Shipside adds: “Those planning to buy their first home in 2017 have more choice of properties and less competition from other buyers than their counterparts a year ago. It’s a possible learning point for aspiring first time buyers that a year ago, buy-to-let purchasers acted more quickly and closed deals at a faster rate, appearing not to take a Christmas break. Admittedly, they had the financial incentive of a deadline to motivate them, but first time buyers still have time to act and currently have the incentive of stronger negotiating power to try and mitigate the upwards trajectory of property prices.”
However, a restraining force on potential first time buyer activity is increasingly stretched affordability. Their favoured target sector, of two bedrooms or less, has seen the greatest price rises both month-on-month (2.6%) and annually (6.4%) of any sector, although this is partly a legacy from last spring’s buy-to-let surge.
Shipside advises: “Some sellers of first time buyer properties may be being over-optimistic with their pricing, giving an opportunity for budget-strapped first time buyers to negotiate, especially if they act now while there’s still more choice available.”
The National Sales Director of estate agent Leaders, Kevin Shaw, comments on the Rightmove figures: “It is clear that first time buyers are outnumbering buy-to-let investors right now. We have seen an increasing number of one-bedroom apartments, which historically would attract first time buyers and investors in equal numbers, snapped up by the former. This is largely because first time buyers have had numerous offers accepted over the asking price, so are obviously determined and able to secure these properties in the current market.
“Investors are understandably focused on the price as this drives the yield, and generally do not want to get into a bidding war to secure these properties. It is a similar story with modest freehold houses in town centre locations, which would typically attract investors. But in recent months the majority of viewers have been private first time buyers.”
Mark Manning, the Director of Manning Stainton in Leeds, Harrogate, Wetherby and Wakefield, also says: “As we got off the train onto the 2017 platform, it was difficult to know who might be there to greet us. Were we to expect a lonely welcome and a continuation of the subdued market we saw at the end of the year, or a swathe of new sellers ready to greet us?
“Fortunately, the answer appears for now to have been the latter. New seller enquiries are 26% up on the same time last year, giving the strongest indication that we may see a slight ease in the lack of supply in the market. Now this will be welcome news amongst first time buyers who have registered in strong numbers and are waiting for much needed new stock to come to market. Combine this with a comparative reduction in new investors and landlords of 32% over the last quarter compared to the same quarter a year ago, and this may well be the year of the first time buyer.”
The CEO of online estate agent eMoov.co.uk, Russell Quirk, responds: “Judging by these latest figures, the market seems to have been slow out of the blocks for 2017, but this isn’t the most transparent picture of current conditions for two reasons.
“Firstly, the market will be very much finding its feet again, with many sellers having abstained from their sale for the Christmas period. Thus, any slowdown so early in the year is likely to be seasonal, with the market getting a second wind heading into spring.
Secondly, it is important to remember Rightmove’s data is based very much on asking price, not sold price, and gives us just a one-month snapshot into one side of the property selling process.”
He continues: “What it does tell us for sure is that the seller apprehension that remained prevalent throughout the back end of 2016 doesn’t seem to have quite subsided, despite the market remaining strong. As a result, UK sellers seem to be adjusting their asking price in order to push through a sale in what they believe to be a weakened market.
“Regardless of this trepidation, Rightmove reported a 3% annual increase in traffic levels, which suggests that demand on the other side of the fence remains strong. Not only are these early bird buyers likely to nab themselves a bargain due to the lower asking prices across the market, but this heightened activity will no doubt see this lull reversed when Rightmove release next month’s figures.”