Demand from first time buyers in the UK is pushing up property market activity, according to the latest Housing Market Activity Report from Connells Survey and Valuation.
The market moved up a gear in May following a steady April as residential mortgage valuation activity rose by over a fifth, 22%, compared to May 2010, an increase of 9% compared to April. Activity has now risen year on year for six successive months.
The report says that this increase has been largely down to increasing demand from first time buyers. In May, there were 26% more valuations for first timers conducted compared to a year ago, an increase of one tenth compared to April 2011. First time buyers now make up 34% of all valuation activity.
The increasing number of homeowners looking to move also played a crucial role in the rise in the increasing activity compared to April. The number of valuations for home movers in May was up a tenth, 11%, on the previous month, albeit a more modest rise of 1% compared to May 2010.
‘Housing market activity has resumed its slow and steady upward trajectory, driven by an upturn at the lower end of the market. Many first time buyers have been encouraged to enter the market by the uptick in the number of higher LTV products available recently,’ said Colin Dorman, business development director of Connells Survey and Valuation.
However, he points out that for the average first time buyer, mortgage finance still presents a formidable challenge. ‘The increasing variety of products is offset against comparatively high rates alongside overly stringent criteria demanded by lenders,’ he explained.
The month of May also saw an increase in activity from re-mortgagors. The number of valuations for re-mortgagors rose by 8% compared to April’s a rise of 70% year on year, albeit from a very low base. ‘Re-mortgaging levels picked up in May as competition between lenders improved, and borrowers took advantage of more lucrative fixed rates on offer. While the remortgage market is slowly flickering back into life, fears over interest rate rises are fanning the flames. When the Monetary Policy Committee do finally hike the Bank rate, remortgaging activity will heat up further as borrowers look to avoid being stung unexpectedly by spiraling mortgage costs,’ said Dorman.
While the number of valuations for buy to let property investors dipped slightly in May, down 3% compared to April, they were actually 42% more conducted than a year ago.
Buy to let investors have not been slow to recognize the opportunity presented by colossal tenant demand and record high rents, and many experienced property investors have re-entered the market in the past year, according to Dorman.
‘The structure of the housing market has changed, and until we see a prolonged improvement in the number of first time buyers able to secure a mortgage, the private rental sector will continue to play a crucial role in housing the UK’s growing population,’ he explained.