The number of first-time buyers and buyers of investment properties using gifted deposits – typically money from a family member to help buy a property – has fallen in the last two years, according to new research from My Home Move.
First-time buyers accounted for 7% of clients using a gifted deposit from June 2016 to July 2017, a decrease of 4.5% compared to the same period in 2014/2015.
Similarly, gifted deposits used by investors fell by 2.5%, accounting for 4.1% of all transactions.
CEO of My Home Move, Doug Crawford, said: “We know that affordability is a key issue for first-time buyers, particularly as 55% of them are looking to buy properties costing less than £150,000, which gives them roughly a 1% chance of finding a suitable property.
“With gifts to this group falling steadily, it does beg the questions as to whether this is reflective of a drop in the number of first-time buyers entering the market, or whether there are other factors in play.”
The research suggests that it is not just first-time buyers that need help from the Bank of Mum and Dad.
Overall use of gifted deposits decreased by just 4% in the same time period, indicating that those already on the housing ladder are in need of additional funding to purchase their next property.
My Home Move said that 90% of all those pruchasing a property using a gifted deposit were second-steppers or middle-movers, an increase of 8.7% between 2014 and 2017.
Crawford said: “As house prices have risen by almost 18% in the timeframe that was analysed, it may be that people are struggling to accumulate enough equity from the home that they are in now to raise a deposit on their new property.
“The average property deposit is now close to £60,000, so it’s likely that the Bank of Mum and Dad are stumping up the additional funds needed to help their children into bigger properties.
“Although the use of gifted deposits seems to have stabilised following the spike in transactions we saw around the time the SDLT changes came into force last year, gifted deposits still account for around 8% of all property transactions, suggesting that over 100,000 people still need help from parents or grandparents to obtain their dream property.
“It is clear that affordability is becoming a concern not just for first-time buyers, but for people on all steps of the property ladder. For now, it seems the Bank of Mum and Dad is still open for business, but with increasing house prices and stagnating wages, it’s unclear how much longer it will be open for.”
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