First-time buyers 'becoming endangered species'

In a rare glimmer of good news for the housing market, the Royal Institution of Chartered Surveyors said yesterday that it detected "tentative signs that housing activity may be nearing a floor", but also warned that the Government's "confused messages" on stamp duty "risks damaging any returning confidence and may discourage mobility".

First-time buyers are, the institution says, "becoming an endangered species" as banks and building societies tighten lending criteria and demand higher deposits. Recently the Bank of England reported a 70 per cent fall in new mortgage approvals, with many lenders withdrawing hundreds of their more generous offers since the onset of the credit crunch.

The Rics survey revealed that more buyers are taking a "realistic" view of the market and lowering their asking prices, while slightly more new buyers are reportedly visiting estate agents and the expectations for improved prices are also marginally improved. However, the wider picture remains bleak. "Tighter credit conditions, in terms of both collateral requirements and generally wider lending margins is impairing housing market accessibility."

Rics did not detect a general increase in distressed selling, but did notice a jump in new instructions in London, the South-east and, especially, East Anglia, which may indicate an increase in repossessions in those areas, possibly as a result of these regions' reliance on employment in the depressed financial services sector.

The volume of transactions in the market remains at record lows; the average estate agency sold a mere 14 properties in the three months to July, or about five houses a month, the lowest since the series began in 1978 and about 40 per cent down on the year. Some 84 per cent more estate agents reported a fall rather than a rise in prices, compared with the 87 per cent negative balance in June. In the north of England, a balance of 98 per cent reported price falls. Scotland is showing more resilience than any other part of the country on most measures.

Ian Perry, spokesperson for Rics, commented: "The lack of mortgage finance has brought the housing market to a virtual standstill, with first-time buyers rapidly becoming an endangered species. Going forward, there are signs that sale activity might pick up a little as sellers start to revaluate unrealistic asking prices."

In recent weeks, there has been some evidence that mortgage costs and availability are improving. The latest Bank of England data suggest that fixed and tracker rates declined last month, in line with easier conditions in the credit markets. The average quoted two-year fixed mortgage rate (for a 75 per cent loan-to-value ratio) was 6.36 per cent in July, down 24 basis points from June. Analysts say further falls in market rates suggest that fixed mortgage rates will come down further over the next couple of months. The average quoted rate on a two-year tracker mortgage (75 per cent loan-to-value) was 6.24 per cent in July.