Hope of lower prices encourages tentative first-time buyer recovery
The proportion of first-time buyers set to enter the property market has seen a recovery from the record low seen last quarter. Rightmove’s Consumer Confidence Survey for October has found that 26% of people of who intend to buy a property in the next year will be doing so for the first time, up from 22% in July. The survey also reveals that the number of first-time buyers expecting prices to drop over the next year has jumped from 1 in 5 to 1 in 3 since last quarter, suggesting that the prospect of lower house prices may be encouraging those buyers to enter the market.
A return of first-time buyer activity is very welcome news. First-time buyers are vital to the overall health of the market as they help to complete chains and, in so doing, improve fluidity and mobility. However, while there are tentative signs of a recovery in overall numbers, perhaps spurred on by the prospect of sellers accepting lower prices, the proportion of all those intending to buy accounted for by first-time buyers is still lower than it was a year ago (28%).
Miles Shipside, director of Rightmove, comments: “Lower property prices might well strike fear into the hearts of property-owners, but it will be music to the ears of those eager to take their first step onto the property ladder. The success of agents in convincing sellers’ to be more flexible on price lowers one of the key hurdles faced by first-time buyers and sets a precedent for all sellers in a chain to accept their share of the reductions. The required mobility of the market cannot be satisfied by short chains and cash buyers, and recovery will be quicker if more sellers are willing to negotiate on price and in doing so make it easier for those purchasing for the first time. Everyone with an active involvement in the housing market should be doing their bit to welcome back first-time buyers with both open arms and open wallets”.
The continued growth of first-time buyer numbers depends on improving affordability, currently determined by house prices and access to mortgage finance. Interestingly, Rightmove’s survey finds that first-time buyers are evenly split on where they believe house prices will be one year from now, with those believing they will be lower marginally ahead at 32%, in front of the 31% who think prices will be around the same and 30% who think they will be higher. The proportion of those believing prices will drop represents a significant jump from the 20% recorded last quarter. It is unlikely to be a coincidence that first-time buyer numbers are showing early signs of recovery at a time when the proportion of them expecting lower prices in 12 months’ time is on the increase. However, lenders must still play their part in ensuring this expanding group of intending first-time buyers are able to act.
Shipside adds: “That first-time buyer opinion is split on the future direction of house prices shows how difficult decision making can be for those intending to get onto the housing ladder. They will often ask themselves; ‘Will prices be higher or lower if I wait?’ and ‘When will I get more for my money?’ This survey shows some tentative signs of first-time buyers coming back over the next year, possibly having saved, begged or borrowed their higher required deposits.”
To see more of the Rightmove First-Time Buyer Report click here.