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Stamp duty changes in UK push first time buyer deposits to 18 month high
First time buyer deposits in the UK have increased by 15% in a year to average almost £30,000, driven by lower stamp duty bills for new buyers, according to the latest analysis. The average first time buyer deposit was £29,127 in January, up 7% compared to December 2014 and 15% higher than £25,314 in January 2014, the first time buyer tracker report from estate agents Your Move and Reeds Rains shows. The data also shows that first time buyers are saving the largest amount for their deposit since July 2013, some 18 months ago, as savings from December’s stamp duty changes take effect. This has also helped drive rising purchase prices for first time buyer homes, which have climbed to a new record. New buyers paid an average of £160,304 in January, 12% more than £143,343 a year ago. Revisions to the stamp duty slab system have reduced the upfront costs for many first time buyers, allowing them to divert that cash into a deposit fund. First time buyers paying the average purchase price would have been liable for stamp duty fees of around £1,600 before the graduated system was implemented, but this would now have been reduced to £700, saving them roughly £900. The report also says that simultaneously, as wages start to see a significant pick-up in real terms, growing purchasing power is reflected in the average first time buyer Loan to Value ratios and these have fallen 1.1% over the last three months, suggesting deflation and growing wages are allowing first time buyers to put together slightly larger deposits. Despite this, the average loan to income ratio for first time buyers has risen on an annual basis. On average, deposits now represent 75.4% of a first time buyer’s income, compared to 70.6% a year ago. ‘A fusion of economic factors is alleviating some of the financial burden of forming a deposit. Wages are starting to recover and inflation has fallen to a record low, meaning buyers have slightly more cash to play with day to day. And stamp duty fees were slashed for many new buyers when the government reformed the old slab system, freeing up further funds. It’s still difficult to save, with savings rates tied closely to the low base rate. But it’s easier to put cash aside than it was a year ago,’ said Adrian Gill, director Your Move and Reeds Rains. ‘However, property prices have pushed a new record for first-time buyers, meaning these extra funds are being diverted directly into larger deposits. Putting together a deposit to buy a property remains one of the most arduous tasks for prospective home-buyers, and schemes like Help to Buy are essential to allow the swathes of buyers reliant on higher LTV mortgages to get onto the housing ladder,’ he explained. The data also shows that there were 21,200 first time buyer… Continue reading
New home building in Australia set to increase in 2015 before falling off
New house building in Australia is forecast to increase for a third consecutive year in 2014/2015 with growth of 7.7%, according to the latest outlook report from the Housing Industry Association. This level of growth would take commencements to a record level of 195,936 but the HIA also believed that this is likely to represent the peak in the current cycle, although the heightened uncertainty that comes with breaking records means further growth shouldn’t be ruled out. Indeed, the HIA central forecast shows that after three consecutive years of strong growth, dwelling commencements are set to decline by 5.7% in 2015/2016 and a further 4.7% in 2016/2017. It also says that from a national perspective, renovations investment continues to disappoint and only grew by 0.5% in 2013/2014, from a decade low. Renovations activity is forecast to grow by 0.2% in 2014/2015. However, the report suggests that momentum to the renovations recovery should build in coming years and projects an increase of 2.8% in 2015/2016, followed by a growth of 3.2% in 2016/2017, taking the value of renovations to $30.3 billion. Meanwhile, the latest data from the Australian Bureau of Statistics shows home prices continued to rise at a sustainable rate during the December 2014 quarter, up 1.9% on the previous quarter. Compared with the same period 12 months earlier, home prices were 6.8% higher. Established house prices increased by 7% over the past year, with other types of dwelling seeing growth of 6.1%. ‘The ABS figures show that dwelling price growth is now comfortably sustainable. In inflation adjusted terms, the rate of home price growth is now around 5% annually,’ said HIA senior economist Shane Garrett. ‘This is exactly the kind of home price growth that prevails over the long term. Australian home price growth is now striking the right balance. The housing industry has played a vital role in bringing price growth onto a more even keel,’ he explained. ‘During 2014, new home commencements reached the highest level on record. This has been a vital factor in assisting housing affordability, as well as providing crucial support for demand in the domestic economy,’ he pointed out. ‘We need to ensure that new home building is allowed to make a full contribution to improving affordability and living standards in the economy. The current design of taxation in the residential construction sector is not consistent with this goal. We need to see greater urgency in terms of easing the tax burden on new housing, and we look forward to potential remedies being included in the forthcoming Tax White Paper,’ he added. Continue reading
House purchase lending in London slowed in fourth quarter, says CML
Greater London saw a decline in the level of house purchase and remortgage lending both year on year and quarter on quarter at the end of 2014, according to the latest data from the Council of Mortgage Lenders. First time buyers in Greater London borrowed £2.9 billion, down compared to the third quarter by 11% in value and down 7% in number of loans. Compared to the fourth quarter of 2013, the total number of loans was down 10% and the amount borrowed decreased by 4%. Home movers saw a decrease in numbers to 8,800 loans, valued at £2.9 billion, which was down 15% by volume and down 20% by value compared to the third quarter. Compared to the fourth quarter of 2013, there was a decrease of 15% by volume and down 9% by value. Remortgage lending declined in the fourth quarter totaling 9,800 loans at £2.5 billion, which was down 12% by volume and down 13% by value. Compared to the fourth quarter of 2013, remortgage lending in London was down 13% by volume and 11% by value. The data also shows that overall lending in Greater London accounted for 21.5% of UK wide house purchase activity, down from 22.6% in 2013. First time buyer affordability changed slightly in Greater London quarter on quarter with first time buyers typically borrowing 3.84 times their gross income, less than the 3.86 income multiple in the third quarter but more than the UK average of 3.38. The typical loan size for first time buyers was £216,000 in the fourth quarter, down from £222,275 in the previous quarter. The typical gross income of a first time buyer household was £56,314 compared to £58,000 in the third quarter. The CML says that first time buyers' payment burden remaining relatively low in the fourth quarter at 20.8% of gross income being spent to cover capital and interest payments, lower than the third quarter's 21%. Home mover affordability changed fractionally, with home movers typically borrowing 3.64 times their gross income compared 3.69 in the third quarter and to 3.03 for the UK overall. The typical loan size for home movers was £276,355 in fourth quarter, up from £289,999 in the previous quarter. The typical gross household income of a home mover was £80,160 in fourth quarter compared to £83,592 in the third quarter. Home movers' payment burden in London was on average 20.5% of gross income being spent to cover monthly capital and interest payments, less than the 20.9% in the third quarter but more than the 18.8% UK average. ‘London is a unique market, with equally unique conditions and challenges, which will need a focus on all types of housing tenure going forward,’ said Paul Smee, director general of the CML. ‘Last year had the highest annual level of borrowers buying a home in London since 2007, with first time buyers leading that growth, but there have been recent signs of the market cooling. The dip in the last quarter of… Continue reading
