First-time buyers trigger growing housing market optimism

John Bagshaw, Corporate Services Director of Connells Survey & Valuation, comments: “By any measure, 2013 has got off to a positive start.  We normally see a gradual recovery from the festive hiatus, but January’s valuations market has come bouncing back.  Credit conditions have shown signs of easing in the New Year and those first time buyers that can are taking advantage, boosting overall activity.”

First time buyers were central to the strong overall growth seen in January – making up one third of the total valuations market for the first time since June. Valuations on behalf of first time buyers grew by 24% from December. In a fifth month of annual growth, there were 40% more new buyers than in January 2012.

John Bagshaw said: “A succession of months like January could start to feel like a sustained recovery for anyone hoping to buy their first home.  A combination of strong buyer demand and improving competition among lenders at the bottom of the market has been central to progress.  It’s also encouraging that we’re seeing lenders innovate with new products to try and unlock the first time buyer market.”

“But even if higher LTV mortgages are increasingly available, this is only one half of the equation.  A more attractive savings market will be vital to sustained growth in new buyers.  At the same time as providing assistance for those who have a deposit, Funding for Lending is damaging savings rates and leaving potential new buyers exposed to inflation.”

Home movers were more active in January, with a 6% monthly increase in these valuations. On an annual basis, this contributed to 40% growth in home-moving activity. Remortgaging also bounced back strongly in January, with a 29% monthly increase, putting remortgaging valuations 31% higher than a year ago.

John Bagshaw concluded, “For potential movers with significant equity, the current mortgage market is an increasingly friendly place.  The greatest beneficiaries of record low Bank rates are those who are looking for a lower loan to value ratio, as risk-averse lenders have targeted them to consolidate their balance sheets.  With the impact of Funding for Lending, rates for these borrowers have fallen even further.

“Established homeowners have also been looking for a better deal without moving home, and may have sprung into action at the end of the festive season.  Fixed rates are still falling as cheaper FLS funds filter through, and tracker rates remain historically low. While SVRs are a long way from the highs they saw in 2007, many borrowers are electing to shave money off their monthly repayments.”

Buy-to-let activity continued to climb in the month to January, to exhibit annual expansion of 41%. By this measure, buy-to-let was the strongest section of the market, even after seeing the slowest monthly growth of only 3%.

John Bagshaw continues: “Buy-to-let is no exception to the positive mood in the rest of the market since the start of the year.  Activity by landlords saw a sharp turnaround from what was a particularly quiet December compared to other types of valuations.  However, as a whole, 2012 was a barn-storming year for the buy-to-let sector and continued demand from tenants will keep driving more investment.  We expect 2013 to see steadier but sustained growth in buy-to-let, as it plays an increasingly important role in the housing market.”

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