First time buyers shun London market

Category: Mortgages
Date: 3/5/2010

The number of first time buyers looking to purchase property in London has fallen significantly in 2010 so far, as rising prices have hit demand.

In January 2009, first time buyers comprised 17 per cent of new buyer registrations, according to Marsh & Parsons. However, that proportion fell to just ten per cent in January this year, and below one in ten in February.

Rather than the end of the stamp duty playing a part in smaller numbers of new buyers – the vast majority of properties in the capital are priced above the lower threshold – it appears that values have simply increased too much for young buyers to consider.

Between January 2008 and April 2009 house prices fell by almost a third (30 per cent) in some parts of London.

This increasing affordability led to a large increase in demand from first time buyers.

This trend was illustrated by almost one fifth (19 per cent) of new buyer registrations being made up by first time buyers in August last year.

However, a 13 per cent increase in values has added an average of £40,000 to house prices in London, deterring potential buyers looking to establish a position on the property ladder.

"Central London may not be typical first time buyer territory, but it's little wonder why," said Peter Rollings, managing director of Marsh & Parsons.

"Mortgage lenders now typically require a 25 per cent 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."

Recent figures from the Land Registry found that the average house price in London was £336,212 in January, compared with a nationwide average of £165,088.

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