In July, 98% of registered tenants wanted to become a homeowner, up 2% from April, and 9% higher than in December, but only 12% are expecting to buy before the end of the year.
Almost half (49%) are expecting to buy in the next five years, a significant increase from the start of the year. In December, only a third (36%) of tenants expected to buy in the next five years.
And tenants currently unable to become first-time buyers named the inability to save for a deposit as the biggest stumbling block to homeownership.
More than half (46%) are unable to buy as they can’t save for a deposit, and a growing number of potential first-time buyers (19%) are concerned that rising costs like stamp duty will get in the way – up by a third from just 13% in December 2012.
London & the South East VS the rest of the UK
The concerns over building a deposit are even more apparent in London and the South East. In this region, 55% of tenants who can’t afford to buy are prevented by high deposit requirements, 12% higher than in the rest of the UK.
This is a result of prices in the capital rising more quickly than the rest of the UK. The latest England and Wales house price index from LSL shows that house prices in London have risen by 7.1% over the year to June, whilst prices in England and Wales as a whole rose by just 2.2%
Transaction costs such as legal fees and stamp duty are more of a concern to tenants in London and the South East, with over a quarter (27%) naming these costs as a key factor blocking them from purchasing property, compared to just 16% in the rest of the UK.
Worries about having enough income for repayments played a lesser role than in the rest of the UK, concerning just 8% of potential first-time buyers.
David Newnes continues: “It remains a huge challenge for first-time buyers to purchase property in the capital. House prices are more expensive, and the size of deposit required dwarfs that in the rest of the country. It’s the reason why six out of tenants in London can’t afford to buy.
"And there are further concerns for the London market. Higher legal fees and stamp duty costs are turning further first-timers off buying.”
The profile of a first-time buyer
The average first-time buyer in July was 30 years old, with an annual salary of £36,299 per annum, 4% higher than in July 2012, when the average salary was £34,936.
The number of first-time buyers who were able to self-fund their purchase fell to 41% in July, from 51% in April. 36% of all first-time buyers in the UK received financial help to put together a deposit from parents or relatives, whilst 9% benefitted from an inheritance, and 2% received familial help with mortgage repayments. 4% received financial help from a government scheme such as Help to Buy, up from 1% in April.
Once again, Londoners need the most help to get onto the ladder, with 44% of all first-time buyers in London receiving help towards a deposit, compared to just 33%, and just 36% of buyers able to self-finance.
44% of all first-timers were looking for houses with three or more bedrooms, and the second most popular property type were two bedroom houses (31%). Flats continue to attract far fewer first-time buyers – with just a quarter of buyers looking for flats rather than houses.
Why buy now?
Four in ten (41%) first-time buyers said they were choosing to buy now as they had only recently been in a position financially stable enough to purchase a property, while a quarter (26%) chose to buy to own a house with their partner, and a second quarter (25%) feel it is time for them to settle down.
Only 8% bought for investment purposes, expecting house prices to rise, down from 11% in April.
And first-time buyers are confident that the value of property is set to rise.
Almost half (46%) of UK first-time buyers think that house prices will rise by up to 5% in the next year, while a further two in ten (18%) believe prices will rise between 5% and 10%. Only three in ten (28%) first-time buyers believe prices will remain flat in the next year, while less than 4% believe prices are likely to fall.
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