First time buyers accounted for more than a third of property purchases in prime London in the second quarter (Q2) of the year
First time buyers accounted for more than a third of property purchases in prime London in the second quarter (Q2) of the year, as buy-to-let activity dropped from high levels seen in Q1, according to the latest London Property Monitor from estate agent Marsh & Parsons.
Having accounted for 22% of prime London property sales in Q1 2016, the proportion of first time buyers grew to 34% in Q2, making them the most common type of property buyer.
This expanding market share was aided by decreased competition from buy-to-let landlords. Following the rush to beat the 1st April Stamp Duty deadline, landlord interest cooled in Q2 to just 13% of all sales, down from an uncharacteristically high 36% in Q1.
As well as bringing good news to aspiring first time buyers, the rise in activity from this type of buyer has also had a positive knock-on effect on second steppers. New homeowners on the first rung of the property ladder have pushed up the level of second stepper activity, accounting for 22% of transactions in prime London in Q2, compared to 9% in Q1.
However, the picture is not so great for first time buyers in prime central London, where investors are the most prominent type of buyer, accounting for 31% of sales in Q2.
The CEO of Marsh & Parsons, David Brown, says: “We’re often surrounded by stories of what a raw deal first time buyers get – particularly in the capital – so it was encouraging to see them dominate the market in the second quarter of the year. For all the hurdles that stand in the way of prospective purchasers, there are plenty of other positive factors, such as historically low interest rates, to help soften the blow.
“The EU referendum result at the very end of the quarter came too late to impact the overall trends seen, but after the initial panic in the days immediately following, it’s been very much a case of business as usual ever since. Property investor activity is unlikely to remain so low in Q3 – especially with the currency exchange situation making London property extremely attractive for landlords from overseas.”
The estate agent also found that the rate of quarterly house price growth in prime London cooled in Q2, down by 0.3% on Q1. Outer prime London prevented this fall being more pronounced, with a 0.4% quarter-on-quarter rise in prices.
The annual picture is also more positive, with a 1.3% increase in average house prices across prime London recorded over the past year, rising to 2.7% in outer prime London. This was driven by particularly strong growth in certain parts of south London, with Clapham (9.2%) and Balham (6.5%) – consistently popular with young professionals – leading the increase. North Kensington (5.1%) also experienced strong price growth over the year.
In terms of property type, larger homes are seeing the greatest increases in price, as buyers with families or those seeking extra space dominate the market. Four-bedroom homes experienced average price growth of 1% over the quarter in prime London, with such properties excelling in outer prime London, where they enjoyed an average 2.8% increase.
However, on an annual basis, one-bedroom properties were the best performers, rising in value by an average of 2.7% since Q2 2015 in prime London, and by as much as 5.4% in outer areas.
Marsh & Parsons also found that 61% of prime London properties are bought with a mortgage and 39% are purchased with cash. This split is reversed in the heart of the capital, where 61% of properties are acquired with cash, proof that cash is still king in the most prestigious postcodes.
Brown comments: “With property investors frontloading their transactions into the first quarter of the year, activity was always likely to take a slight step back in the second quarter and so it transpired. Q3 is unlikely to see a marked uptick in values or transactions, as we enter a traditionally slower season that sees individuals more preoccupied with holidays than houses, but is reassuring that the UK’s decision to leave the EU isn’t having the immediately negative impact that some doom-mongers predicted. Indeed, with the Bank of England reducing interest rates to a new historic low, mortgage finance will continue to be accessible, with pricing as attractive as it ever has been.”