The recovery is being spearheaded by houses and properties at the upper end of the market, while flats and first time buyer homes continue to record annual falls. ‘Home-mover’ asking prices, i.e. those properties with 3, 4 or 5 bedrooms suitable for existing homeowners moving up the ladder, are 6.61% higher than a year ago, while entry level properties (studios, one and two-bedroom homes) are 4.6% lower. This is likely to reflect the fact that many existing homeowners still have substantial equity in their properties, so are able to access the mortgage market fairly easily despite tighter lending criteria.
First time buyers have also been hardest hit by the retracted employment market, reducing demand for entry level homes and therefore impacting values. The average value of houses on the site is currently £239,379, 1.1% higher than a year ago, while flats are 2.17% lower than a year ago at £174,318.
Falling prices at the lower end of the market have opened up an opportunity for first time buyers, who face an ‘Affordability Gap’ which is £11,148 smaller than at the start of the year. The Affordability Gap – the cash deposit needed to a buy a typical First Time Buyer home after obtaining a mortgage achievable with average First Time Buyer household income – has plummeted since January but now appears to be bottoming as prices stabilise, suggesting now is the time for First Time Buyers to enter the market. They currently need to save 1.74 times their gross annual household income, compared to 2.18 times at the start of the year.
Michael O’Flynn, Director of FindaProperty.com, said:
"Movement into positive annual growth in house prices is the news homeowners have been waiting for and suggests the market is making a sustained recovery. There is no doubt that lending criteria remain tight, but many existing homeowners are still able to access the mortgage market using the equity they have built up over the years.
"This may be the ideal time for first time buyers to enter the market, as the affordability gap has declined drastically since the start of the year and now appears to be bottoming. But while first time buyer affordability is clearly improving, they remain constrained by the income multiples offered by lenders and still need to raise very substantial deposits amounting to more than a third of the value of the home they wish to buy. The majority of those who are able to seize this buying opportunity will still be relying on the Bank of Mum and Dad to raise the cash they need."
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