First-time home buyers return to market

First-time buyers are returning to the housing market, according to a survey of estate agents published today.

The proportion of sales accounted for by first-timers rose in July for the second month in a row to more than 17 per cent, the National Association of Estate Agents said.

This reversed the more general downward trend that drove the proportion down to an all-time low of 14 per cent back in May.

The NAEA said that while this was still below the 2002 average of 25 per cent, it was evidence first-time buyer confidence had returned and that sustained recovery in the housing market would be seen in coming months. The picture was born out by anecdotal evidence from NAEA branches. Paul Boswell, at Meeching Estate Agents in Newhaven, East Sussex, said: "First-time buyers are only now beginning to come back on to the scene and the autumn market could help everyone meet their annual objectives."

Mike Skelton of Promark in Bridlington, East Yorkshire, added: "The reported demise of the housing market has been premature. The market continues growing strongly in this area."

The reports runs counter to similar surveys from the Halifax bank and Nationwide Building Society, the UK's leading high street lenders, who have warned of a dire shortage of first-time buyers.

Nationwide said that at the current rate this would see the lowest number of new entrants into the market since1969. Halifax said the total was at its lowest level since its records began in 1974.

The extent of the problem was vividly demonstrated last week when Halifax claimed that the average house price paid by first-time buyers in Britain as a whole had risen from £45,249 to £103,294. The average first-timer's deposit has risen to £18,950, compared with £5,433 in 1993. The average house in London is £193,508 - an increase of almost £130,000 or nearly 203 per cent in 10 years. At the same time, first-time buyers' average earnings in London had risen by only 40 per cent. The average deposit paid by a first-time buyer in London has risen from £9,319 in 1993 to £40,095 now.

The NAEA said that in terms of prices, the annual rate of price inflation was virtually unchanged compared with last month at 8.5 per cent, following four months of falls from a recent peak of 18.5 per cent.

"The sharply declining trend in house-price inflation seen since the beginning of the year is over," it said. Other evidence for a strengthening housing market came from the fall in the number of viewings needed to achieve a sale - 15.7 viewings per sale against 27.4 last month. "This suggests people are finding their ideal property more quickly," it said.

The NAEA said there was evidence that sellers were becoming more realistic in setting their prices, which had helped to stem the decline in house-price inflation.

UCB Home Loans, part of Nationwide, says that increasingly younger buyers are opting to rent rather than overstretch themselves with a large mortgage, even at the low interest rates currently prevailing.