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The tentative return of FTBs - 25 July 2008

The National Association of Estate Agents (NAEA) reported this week that the proportion of First Time Buyers (FTBs) in the UK property market has risen significantly both since this time last year, and month-to-month. Although this is a positive sign for a property market that is decidedly in the doldrums, there are a few other points to remember.

Nonetheless, FTBs made up 11.8 per cent of the property sold in June 2008, compared to 9.8 per cent in June 2007, and 10.6 per cent in May this year. This rise indicates that it is a good time for younger buyers to enter the market, and those with a deposit behind them are finding that there are some very good bargains to be had.
NAEA president, Chris Brown, believes that this is a good time for first-time buyers who have adequate funds in place to make a purchase. According to Mr Brown, while potential purchasers generally remain very cautious those courageous enough to jump do so because they realise they might benefit from current market conditions.
Mortgage conditions remain hard for all types of buyer, however. The number of mortgage products on the market has shrunk significantly since the beginning of the year, and there are no offers for the 100 per cent finance that many people blame for the threat of negative equity that is hanging over many who bought in the last year. For most people who are buying now, banks will require that they provide around 25 per cent of the finance themselves.

The FTB figures are also slightly skewed due to other factors in the market. The proportion of FTBs buying property rising does not necessarily mean that more of them have clambered onto the property ladder. As a proportion, it may mean that less people are buying, but that FTB buyer numbers are dwindling slower than resellers. Also, as FTBs have no chain to concern them, they do not have to wait for the elusive buyer to appear in a tough market to enable them to move themselves. Many resellers may have decided to sit tight until they have some chance of selling their own home, before they commit to buying anywhere else.

Without wanting to add a negative to what is presented as good news for the property industry, it is important to keep hold of something that has been lacking from the UK property market for a few years – a sense of realism.

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