Government policies designed to help first-time buyers get on the property ladder at the expense of landlords appear to be working, new figures suggest.
The proportion of fist-time buyers in the housing market increased in February, while the buy-to-let market fell to a new low.
According to Connells Survey & Valuation, first-time buyers now account for 36% of market activity, up from 28% the previous year.
In contrast, buy-to-let purchases almost halved in February compared to the previous year.
While the surge last year can be attributed to landlords rushing to purchase property before the stamp duty increase, buy-to-let figures now account for 8% of activity – the lowest level for February in over five years.
It has been a tough year for landlords, who have been hit by a raft of new rules and regulations.
Last year, the government increased stamp duty by 3% on second homes as part of its plans to curb the buy-to-let market and free up property for first-time buyers.
From April, mortgage interest relief for residential buy-to-let properties is set to be reduced to the base income tax rate, which is 20%.
The Bank of England has also introduced tougher underwriting standards and affordability checks to make sure borrowers can cover the cost of their mortgage in the event of an interest rate rise.
The near zero base rate has ensured that mortgages remain more affordable than ever – with gross lending at its highest level since 2008.
John Bagshaw, corporate services director of Connells Survey & Valuation, said: “The stamp duty surcharge has succeeded in helping first-time buyers at the expense of landlords. But this may well be temporary. Less competition for today’s first-time buyers comes at the expense of tomorrow’s.
“Most people rent as they save for a deposit, but the steady investment into the rental market is running dry. With limited new homes being built for the private rental sector, rents will soon start to rise.”
However, the increase does not mean the government has succeeded in boosting the prospects of first-time buyers in the long-term as the surge is only marginally higher than the 10-year average of 35%.
“The rapid growth in first-time buyer activity is a recovery from a lower position, rather than a substantial improvement in market conditions. It’s important to not just look at the snapshot numbers but take into account the long-term trends,” said Bagshaw.
“It’s still incredibly difficult to get on the property ladder. Most aspiring home owners will tell you about the Herculean challenges they face to save for a deposit. Despite all the Help to Buy programmes, first-time buyer activity is only 1% higher than it has been, on average, over the last decade.”
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