House prices fall despite increased interest from first-time buyers

Published 15th Apr 2010

First-time buyers returned to the housing market in February but their increased numbers failed to prevent a slight decline in house prices, official figures suggest.

Research from the Council of Mortgage Lenders (CML) indicated that the number of mortgages to first-time buyers rose by 13 per cent in February to 12,600. Such loans had collapsed between December and January from 24,800 to 11,200.

The total number of mortgages lent was 49 per cent higher than in February last year and worth £5 billion, an increase of 67 per cent.

House prices fell by 0.1 per cent between January and February, compared with a 2.2 per cent rise the previous month, according to the Department for Communities and Local Government. The average house price based on the department’s measure is £204,359 — up 7.4 per cent from February last year.

The department’s figures suggest that the market improvement has been driven by first-time buyers: it reported a 9.3 per cent annual rise in first-time buyer property prices, against a 6.6 per cent rise for homes bought by people who had owned before.

The government index showed that the market for new-build homes was less buoyant over the past 12 months, with prices down 3.9 per cent for recently built property compared with an 8.2 per cent price rise for pre-owned homes.

The CML said that it was difficult to predict how the housing market will fare because the start to the year was worse than expected, with sales hit by harsh weather and the end of the stamp duty exemption.

Bob Pannell, head of research for the CML, said: “With the supply of credit still tight and the upcoming election causing political uncertainty, we are unlikely to see much change in the near future.”

The Chancellor announced in the Budget last month that stamp duty would be scrapped for first-time buyers for two years on properties worth less than £250,000.

Some commentators said that first-time buyers would continue to struggle while mortgages for those with small deposits remained scarce.

Jonathan Moore, director of easyroommate.co.uk, a renting website, said: “Lending to first-time buyers is still pitifully low — with just half the numbers of loans in February compared to 2007. Thousands of first-timers remain frozen out by a combination of unaffordable house prices and too restrictive lending criteria.

“Wannabe buyers simply haven’t got the ready cash to stump up for the colossal deposits lenders still require. With the doubling of stamp duty threshold for first-timers, banks and building societies need to meet the rising demand from first-timers or thousands will be forced to miss the boat.”

Grainger, the housebuilder and landlord, yesterday gave an upbeat picture of the past six months, reporting a 42 per cent rise in sales in the half-year to the end of March, including sales of land and of rental properties with existing tenants.

The Newcastle-based group said that it had taken advantage of increased stability in the housing market by buying property worth £43 million in the six-month period, compared with acquisitions worth £12 million for last year.

An early indication from Countrywide, the estate agent, suggests that mortgage lending may pick up again in March. It said that applications had risen to pre-recession levels — an 8 per cent increase on February and a 112 per cent increase since March last year. It attributed the rise to more confidence among homebuyers and a greater number of mortgages on the market.

Source: ' Times '

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