Will more homes on the market mean good news for first time buyers or will global uncertainty scupper purchases? Ginetta Vedrickas investigates
Earlier this year, Zoopla found that there were the highest number of homes listed for sale for a decade, signalling good news for first time buyers according to the property website. Its House Price Index found that there are 6% more homes for sale than a year ago, something Zoopla predicts will rise further over the next few months and, as well as increasing choice for buyers, the website believes that it could help keep price increases in check for the rest of the year. The Index showed that house prices have increased by 1.3% in the past year generally, with house prices higher than a year ago in northern England and Scotland but, more optimistically, 40% of UK homes are now cheaper to buy than rent. Improving mortgage rates and easing lending criteria were pinpointed as making homes easier to buy, although the crisis in the Middle East has since affected mortgage rates.
House price growth in check
Despite the increase in market activity, house price growth remains subdued compared to last year’s prices – a rise of 1.8% – but there are hot spots bucking the trend. Northern Ireland has seen the fastest rate of price growth at 8% and, across the UK, the North West is the strongest performing region, with prices up 3.3% year-on-year, followed by Scotland at 2.8%, and the North East, 2.5%.
By contrast, average prices in London are 0.2% lower than a year ago. Zoopla found that the areas with higher price growth are generally more affordable and have fewer homes for sale than a year ago, which the website points out “limits buyer choice”. Across the rest of the country, price growth is the same or weaker than a year ago. Southern England remains the softest market, with average prices broadly unchanged over the last 12 months.
Steady levels of sales activity
The UK housing market is seeing steady levels of sales activity despite rising uncertainty linked to events in the Middle East, according to Zoopla, as tensions push up mortgage rates and reduce buyer demand. The website found that, while the market remains active, it is increasingly being driven by a smaller group of committed buyers as some households start to delay moving decisions. This is creating a growing gap between weaker buyer demand and more stable levels of sales agreed. Zoopla’s data shows that buyer demand has been running below last year’s levels across the first three months of the year. Demand weakened further during March, reflecting the impact of events in the Middle East, with buyer enquiries 13% lower than a year ago as potential buyers adopt a more cautious “wait and see” approach.
Average mortgage rates have increased by 0.4 percentage points in the last month, with many sub-4% deals being withdrawn as financial markets, and buyers, adjust to uncertainty over the inflation outlook. It’s not all bad news, says the website, as sales agreed are proving more resilient than demand, registering a decrease of just 2% year-on-year. This reflects the continued presence of “committed movers” – buyers with mortgage offers agreed and/or a clear need to move, who are continuing to support the number of sales agreed.
Mortgage rates fluctuating
Earlier this year, average mortgage rates for new loans were at their lowest level for four years thanks to lower base rates and stronger competition between lenders. Rates on both two-year and five-year fixed deals were below 4% for the first time since 2022 but have since risen to 5% following economic uncertainty and inflationary fears.
Cheapest towns in England
Zoopla also carried out some separate research looking at the most affordable towns to buy a home. While acknowledging that uncertainty is building on the back of events in the Middle East, its data shows that sales are holding up as serious buyers press ahead with their moving plans. The website found that towns in the North East are among the UK’s most affordable locations.
Zoopla’s affordability rankings are based on the 300 popular towns for families looking to buy three bedroom homes. Popularity is based on the number of views per property, and it then ranked these towns by affordability. The “affordable” status is based on them having a low “value-to-earnings” ratio, the equivalent number of years’ salary it would take two adults to buy a home.
The top three affordable areas are all in the North East, with Shildon, a quiet town with a rich industrial heritage in County Durham, near Bishop Auckland, coming top of the list with an average price of just £82,500, and a value-to-earnings ratio of 1.36x. Homes in Shildon are three times cheaper than the most affordable towns in the South East. Towns in Northern England, Scotland and Wales all top the affordability rankings but the report noted that every region has affordable towns that are popular with families, with the greatest affordability challenges in southern England. Ferndale, a town and community in the Rhondda Valley, is the most affordable town in Wales with average three bedroom home values of £113,000 and a value-to-earnings ratio of 1.85x. Cumnock, a historic market town in East Ayrshire, south of Glasgow, tops the list in Scotland with an average value of £113,600 and a value-to-earnings ratio of 1.68x.
Empty homes
There may be more properties on the market than at this time last year, and areas which are more affordable, but research reveals that large numbers of properties across the UK are lying derelict. National Empty Homes Week is a yearly event organised by the charity Action on Empty Homes to raise awareness of the issue of empty homes and celebrate the achievements of organisations in bringing them back into use. The latest report found that one in every 25 homes in England is currently empty, equating to over a million homes. The research also found that half of the public, 49%, would like abandoned and derelict buildings in their home towns to be revived for new purposes such as housing, business or retail.
Research by specialist lender Together found that over half of Brits, 52%, walk past a deserted and derelict building every week. Since 2022, Together has seen a 95% increase in the number of bridging loans the lender has funded, some of which will have been used to bring empty, run-down or otherwise “unmortgageable” homes back into use.
Together’s sales director Elliot Vure says that, while the nation often focuses on building new homes, a large and often overlooked percentage of homes in England are lying empty. “It’s high time we transformed derelict properties into homes. Traditional mortgage products often aren’t suitable for empty or dilapidated homes, especially where a property is deemed uninhabitable. That’s where specialist lending can play a vital role.” Vure believes that there is a shortfall in local authority power and resources for identifying these empty homes and taking action on empty home complaints within councils. “There are also barriers for prospective buyers, investors and landlords to accessing the right kind of finance once these properties are on the market.”
Highest ever price gap between first time buyer and second stepper homes
The picture for first time buyers is challenging but so is trading up the property ladder. Latest data from Rightmove shows that the price gap between a typical first time buyer home and a second-stepper home is at its highest ever, increasing cost pressures on those looking to trade up. The average asking price for a three or four bedroom typical mid-market second stepper home is 52% more than a one to two bedroom, typical first time buyer home. Trader-uppers must build up an additional £23,780 in equity for a deposit on average, to afford to trade up from a typical first home to the second rung on the ladder. It’s most expensive to trade up from a first time buyer home in the South East and cheapest in Yorkshire & The Humber. The report found that over the past 10 years the average price of a flat has only increased by 8%, compared with a 34% increase for houses.
Ginetta Vedrickas
GinettaVedrickashas always had a passion for property. With over ten years of experience working for a local authority housing department, she completed an MA in social policy and housing before training as a journalist at the then London College of Printing. Since then, she has writtenmainly onproperty for most British newspapers including The Independent, Observer, Mail on Sunday, The Times, London Evening Standard and was the editor of Metro’s property section.She’salso written for overseas titles such as AD’s The National and Ireland’s Business Post. Today she freelances for a range of magazines including Showhouse and First Time Buyer.