8% fewer homes were sold across UK last month compared to March last year according to today’s HMRC update. They record all sales over £40,000. Just 68k transactions completed compared to 141k in March 2007. Transaction volumes sank to their lowest in November 2008 when just 53,000 homes were sold.
Further more, confirmation from the Council of Mortgage Lenders (CML) that in a bull market like 2007 around 40% of all mortgages offered were to First Time Buyers (FTB’s). With all the talk of there being a need to help first time buyers including the £250m stimulus package to help just 10,000 of them announced in the Budget, guess what the percentage of mortgages offered to First Time Buyers was last year? 37%!
If you consult the Tax Man then in 2006 there were 1.6m transactions across the UK. Last year there were just 890,000.
So the number of FTB’s has fallen by 300,000 or 60% but the number of Second Time Buyers by 400,000 or 36%.
Once again, using data kindly provided by the CML I have calculated that historically around 28% of all house buyers are what one might call ‘cash’ purchases. In January it had risen to 40%.
The biggest losers when transactions fall – particularly sales to FTB’s are developers. It is they who seem to shout loudest about their plight and although they hold the solution in their own hands they continue to plead with Government for state help. 10,000 buyers out of the expected 200,000 is not going to make much difference but it won’t stop the builders wanting even more help.
First time buyers usually stay in their new home for five years on average but in large parts of the country house prices are still around 11% down on their peak in 2007. Many of these first homers will now be in or close to negative equity and so can’t actually move even if they wish to.
So long as lending remains tight the only really hope for the housing market is a realisation that current volumes (and slightly lower values) will be the norm for the foreseeable future. I expect that institutions and other investors will take the place of traditional first time buyers at the foot of the housing ladder and expand the private rented sector. That’s certainly what Government would like judging by the changes to Stamp Duty Land Tax announced in the Budget for bulk purchases of properties. The question is will this be enough to get volumes going again?
We may have been a nation of home owners five years ago but the lasting legacy of the Credit Crunch may be that more of us will have to settle with renting. An Englishman’s home will be someone else’s castle.