Making the Right-Move could be Wrong

According to a released survey last week by Rightmove Plc, the UK listed online real estate portal which is rumoured to list over 90% of the UK Estate Agencies inventory, first time buyers are increasingly squeezed out of the London residential property, as prices soar while demand shows no sign of abating. This is a concern, as first-time buyers are the lifeblood of the housing market, playing an important role in the wider market by helping to complete chains, enabling those that already own a property to move.

With the average London house price now at over 8 times average London gross incomes and at 4.6 times average earnings nationally, one could understand the comment, if it was correct.

The UK’s two largest lenders, the Halifax and the Nationwide, whose house price data stretches back to a respective 30+ and 60+ years, have both confirmed that first-time buyers are at a 7-year high, spurred on by cheap mortgage rates and government schemes like Help to Buy, which require smaller deposits.

The Halifax reports that first time buyers jumped by 22% in 2014, following a 23% increase in 2013, whilst the Nationwide, reported in May that first – time buyers accounted for 48% of house purchase activity in March, a record high well above the long run average of 38%, kindly providing a chart to show this, courtesy of the Council of Mortgage Lenders:

23 July 2015 Blog 1

The Rightmove survey goes on to report that a typical first-time home surged by 1.1 percent in July and nationally by 0.2 percent, going on to say that demand remains strong for properties in the two-bedrooms-or-fewer sector, typical for first-timers.

A re-read of the survey confirmed that the Rightmove data relates to asking prices and “Asking Prices” are not necessarily what you get. Furthermore, we note that asking prices follow actual prices received, as can be observed within the next chart:

23 July 2015 Blog 2

Like changing down through the gears of a car, when the car loses momentum before coming to a stop and then possibly going into reverse, asking and actual prices received have been slowing down for over a year now, and certainly not surging.

If one adds into the mix that a full 40% of UK houses bought last year went to “investors,” with an increasing percentage of the buy-to-let army made up of the elderly, suckered in and often with a mortgage as they can no longer stand the low bank deposit rates on offer, the car may shortly be in reverse at speed.

 

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