The Council of Mortgage Lenders (CML) have published data showing first time buyers in Scotland have been extremely active in the housing market during the second quarter of the year.
There were 6,500 home loans approved which is an increase of 33% on the same period last year. This is the largest total in a single quarter since the middle of 2008.
£630 million was advanced to first time buyers in Scotland during the second quarter which is an increase of 54% compared to the first quarter and up 40% on the second quarter last year.
What About Affordability?
The good news is that first time buyers in Scotland continue to borrow less relative to income when compared to the rest of the UK. Typically, borrowing stands at around 2.91 times income which compares favourably to the 3.3 times income borrowed by first time buyers, on average, in the rest of the UK.
The report identified that the loan to value ratio for first time buyers in Scotland had increased slightly since quarter one from 80% to 82%.
The Knock On Effect
First time buyers are key to stimulating the market as they will typically buy a property from a second time buyer allowing those individuals to move up the ladder and so on. This is borne out by the CML data which shows that 8,100 loans were advanced to home movers in the second quarter which is an increase of 47% compared to the first quarter and up by 5% on the second quarter of 2012.
The Impact Of Increased Activity
As the balance of supply and demand begins to move we are now seeing more properties setting a closing date and this is what influences the final price of a property. Buyers who are keen to secure a property which has a closing date will be required to make an offer which is typically more than the asking price.
On the closing date, the seller will be presented with all offers in order to make a decision on which (if any) they are willing to accept. One of the key components is of course the ‘highest offer’ although there are other aspects to consider.
For example, an offer may be considered ‘good’ if the buyer has sold their own property and is in a position to move within the timescales which suits the seller.
Does Increased Activity Mean House Prices Will Increase?
We have seen strong activity during the summer months and we are fairly confident this will continue for the last quarter of the year.
It is widely anticipated that the Help To Buy Scheme being introduced in January 2014 will stimulate the market further and there have been concerns that this could trigger an increase in property prices. However, forecasting the market is almost impossible to do with any accuracy.
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