First-time home buyers in the UK are ignoring the doom-and-gloom forecasts surrounding Brexit and using it as an opportunity to get into the housing market.
The number of first-time buyers reached its highest level in more than a year in August, according to new monthly data released on Tuesday by the trade association UK Finance. Nearly 36,000 new buyers secured mortgages in the month, up 2% from the same period last year. They were getting bigger mortgages too, worth a combined £6.1bn ($8.1bn).
By contrast, just 6,000 new buy-to-let home mortgages were secured in August, down 13% compared to August 2017. And the mortgages were worth 20% less, at £800m ($1.1bn).
“New buyers entering the market are facing less competition than before,” said Aneisha Beveridge, head of research at the real estate firm, Hamptons International. “You could argue now is a good time for the savvy buyer to step in.”
Brexit uncertainties, combined with the introduction of government tax schemes to deter investors from buying multiple properties, caused many parts of the UK housing market to stall in recent years. In particular, London experienced home price declines in the wake of the Brexit referendum.
These developments, which sapped positive sentiment from the market, came as unemployment hit its lowest level since the mid-1970s and interest rates crept up slowly from record lows.
Government schemes including Help-to-Buy and the recent move to scrap stamp duty for many first-time buyers also stimulated demand among younger people who previously could only dream of getting onto the housing ladder.
“Many of the traditional indicators point to it being a good time to buy a home in the UK,” noted Lawrence Bowles, a research analyst at real estate services firm, Savills. “Wage growth has been positive in inflation-adjusted terms since the start of the year. Despite a rate hike in August, interest rates are still historically low.”
First-time buyers are clearly getting the hint.
Still, housing affordability and housing shortages remain a problem in the UK.
“Whatever happens in the short term regarding the UK’s relationship with the EU, house prices will return to growth in the long term due to the lack of suitable supply, but at a slower rate than we’ve seen historically. Most buyers are in it for the long term so are likely to see this part of the cycle through,” said Beveridge.
Henry Pryor, a veteran in the UK real estate industry, has been unfazed by Brexit, noting that buyers have more options and flexibility now.
“I have been buying and selling homes for 34 years and I can’t remember a better time to bag yourself a bargain,” he told Yahoo Finance UK. “The sales side is driven by the three Ds, death, debt and divorce, all of whom ‘have’ to sell. Very few buyers have to make a purchase, leaving sellers with few options.”
Brexit is set to occur at the end of March 2019. The UK is negotiating a final deal with the European Union on its exit terms, which has created great uncertainty for businesses across the country, including financial service firms and manufacturing companies.
Source: Yahoo Finance UK