UK Property: Fall in landlords purchasing sparks boost to first time buyer numbers

UK Property: Fall in landlords purchasing sparks boost to first time buyer numbers

- in Real Estate

First time buyers reached its highest monthly level since June 2017 (Image: Andrew Paterson/Alamy Stock Photo)

The data, released by trade lending body UK Finance which represents over 90 per cent of all mortgage lenders in the country, indicates that there were 35,500 new first-time buyer mortgages completed in August, a two per cent year on year increase.

According to UK Finance figures, the average first-time buyer is 30 and has a gross household income of £42,000.

Conversely, there were 6,000 buy to let home purchase mortgages completed in August, a decrease of 13 per cent on the same period last year, and a drop of 20 per cent on lending values year on year.

The increase in the number of first time buyers balanced a slight drop in the number of home mover mortgages completed in August, which was 2.3 per cent lower than the same period last year, resulting in the market remaining flat for the month.

However, the fall in the number of landlords purchasing, as reported yesterday, isn’t a surprise and is likely to be one of the intended consequences of additional taxation measures on buy to let investors.

That said, what today’s data does prove is that whilst this is providing some first time buyers with an opportunity to purchase, given the disparity between the increase in the number of first time buyers and the drop in the number of buy to let purchases to date, there is still some way to go before the books balance.

Average first-time buyer is 30 and has a gross household income of £42,000 (Image: Dan Kitwood/Getty Images)

In addition, there is a general consensus within the property industry that a lack of landlords is likely to exert upwards pressure on rents, which could make life harder for tenants who are already stretched in terms of monthly finances.

Commenting on the data, Jackie Bennett, Director of Mortgages at UK Finance, said: “Buy to Let remortgaging saw relatively strong growth in August, due in part to the number of two-year fixed deals coming to an end.

“This suggests that while new purchases in the buy to let market continue to be impacted by recent tax and regulatory changes, many existing landlords remain committed to the market.”

Brian Murphy, Head of Lending for Mortgage Advice Bureau added that an increase of first time buyers is: “Positive news for the rest of the property market, as they do underpin the housing ecosystem.

“If investors are currently less active on the purchase side, the fact that those taking their first step on the ladder are purchasing available stock may help to ensure that increased availability of properties at entry level doesn’t cause overt downwards pressure on pricing, thus keeping the market stable in line with the general direction of travel for 2018 so far.”

However, if as rumoured Philip Hammond introduces a tax incentive for landlords to sell rental properties to tenants in the Autumn Budget later this month, the number of active investors may fall significantly.

Chancellor Philip Hammond is said to introduce a tax incentive for landlords (Image: TOBY MELVILLE/ REUTERS)

It’s understood that the Chancellor is reviewing proposals to introduce a capital gains tax exemption for landlords selling to tenants who have lived in the property for three years or more.

At the moment, an investor who sells a property that has been rented is liable for capital gains tax on the profits of the sale at 28 percent. Under the suggested plans, the landlord would be eligible for tax relief with the amount split between both landlord and tenant.

It is envisaged that this could then form part of, if not all of, the tenant’s deposit for their mortgage as well as an incentive for the landlord to sell.

Remaining pragmatic in terms of how this or any other changes may assist the plight of first time buyers, Jeremy Leaf, former RICS residential chairman suggests, “It remains to be seen whether the Budget actually encourages more potential first time buyers to take the plunge before rising rents, prompted by shortage of property to let, makes deposit-saving even more difficult.”

How a further pincer movement by the treasury on landlords to encourage more to dispose of their existing assets and fewer to buy will be met by the investor community, though, remains to be seen.

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