Fall in London first-time buyers

The number of people looking to buy their first home in the capital has dropped sharply, as recovering property prices render the housing ladder unaffordable for first-time buyers.

Estate agent March & Pearson says that last January first-time buyers accounted for 17% of new registrations on its books, but that figure dropped to just 10% this January, and fell again in February.

The agent says that this has nothing to do with the end of the Stamp Duty holiday on December 31st, which pushed many buyers in other parts of the country to complete their purchases before the year end.

It points out that, with average property prices in London so high, the temporary increase in the threshold at which Stamp Duty is payable, from £125,000 to £175,000 had barely any impact on the market as so few properties fall into this bracket.

Between January 2008 and April 2009, house prices plummeted by up to 30% in some parts of the capital, resulting in a surge in first-time buyer demand last year.

In August 2009, first time buyers made up almost one in five new registrations (19%) at Marsh & Pearson. But healthy house price growth in the capital since spring 2009 (up £39,602 or 13% on average) is now deterring growing numbers of first timers.

Peter Rollings, managing director of Marsh & Parsons, says:

“Central London may not be typical first-time buyer territory, but it’s little wonder why. Mortgage lenders now typically require a 25% deposit from first time buyers, meaning they would need to put down over £84,000 to purchase the average London property – realistic for only the tiny minority with substantial parental assistance.

“The end of the Stamp Duty holiday has not had a great impact on demand, as so few purchases were eligible for exemption.

“The lack of homes priced below £175,000 meant only 13% of London transactions benefited from Stamp Duty relief in the first year of the holiday – and only 22% of these purchases were in Inner London boroughs.

“Higher average house prices mean London is the area where first-time buyers are most in need of support and, if the government is serious about helping them, it must reintroduce the Stamp Duty holiday and – crucially – take into account the wide regional variations in prices.”