First time buyers seen to be crucial to the wider annual improvement
Valuations activity in the UK climbed annually in October following a strong year on year improvement in first time buyer numbers, according to the latest Housing Market Activity Report by Connells Survey & Valuation.
The total number of residential valuations conducted by the firm in October was 7% higher on an annual basis, following a smaller than normal seasonal monthly contraction from the September peak. While activity fell by 8% on a monthly basis, it was a much gentler decrease than the average drop of 23% between September and October since 2007.
‘After a September peak, the valuations market has weathered the usual October slowdown, and it is encouraging that activity is ahead of last year’s level. The recovery isn’t set in stone by any measure, but a stronger than expected showing from first time buyers offers a comforting glimmer of hope,’ said John Bagshaw, corporate services director of Connells Survey & Valuation.
He added that Funding for Lending should really start to feed through to borrowers over the next three months and if more funds reach those at the bottom of the market, there could be overall buyer numbers return to a healthier level.
First time buyers were crucial to the wider annual improvement, with valuations for new buyers up 21% compared to last October. Despite the expected monthly slowdown, numbers of first time buyers fell by only 10%, compared to the historic average fall of 28%.
‘First time buyers are the lifeblood of the housing market, and recovering numbers compared to last year is a step in the right direction. Any sustained and tangible growth in transactions will be tied to prospective first timers’ ability to access the finance they need to move,’ said Bagshaw.
Buy to let was another sector showing strong annual increases, with the number of valuations rising by 10% compared to October 2011. While valuations for new buy to let mortgages showed a monthly fall of 6%, buy to let remortgaging was up 11% from September levels.
‘Even if credit conditions ease in the next year, it will take a long time before the number of people buying their first home reflects pre-crisis levels, and private rental will continue to expand as landlords look to cater for the UK’s growing population. At present, buy to let landlords with low LTVs are taking advantage of favourable interest rates available to refinance or expand their portfolios,’ explained Bagshaw.
Home moves and remortgaging were the slowest sections of the valuations market in October. Numbers of homeowners moving showed a 4% monthly dip, representing a 4% fall on an annual basis. Although remortgaging activity fell by 9% from September, it is still 5% higher than in October 2011.
‘In many areas, values are still below what homeowners originally paid for their property, and this will remain a drag on both moves and remortgages. Tight criteria are also limiting remortgaging, even though rates remain extremely competitive in general for those who do qualify,’ said Bagshaw.
‘However, the publication of the final Mortgage Market Review has removed a source of uncertainty for lenders, and may allow them to loosen mortgage criteria as a result. On top of this, participation in the Funding for Lending Scheme is growing, with the number of lenders involved swelling to 30, an improvement which could help boost remortgaging over the medium term,’ he added.