Surge In First-Time Buyers 'To Fall Away'

A report suggests the number of first-time buyers rose 45% in the year to July but the surge in transactions will slow as property prices rise.

The latest First Time Buyer Monitor from LSL Property Services shows that plunging mortgage rates - partly a result of Government schemes to boost lending - helped 26,100 step on to the property ladder in the month.

That was a rise of more than 8,000 on the same month in 2011 and the best performance since November 2007, the report said.

The figure was released on the day the Halifax House Price Index registered a 0.4% increase month-on-month in August, 5.4% year-on-year in the three months to August, and suggested housing costs would continue to climb gradually during 2013.

The LSL report highlighted the improving affordability of first-time buyer mortgages as the Funding for Lending Scheme (FLS) meant banks were able to pass on cheaper credit to borrowers.

Other initiatives such as NewBuy and Help to Buy have been aimed at giving people with smaller deposits a leg-up.

But the study also pointed to strong house price growth over the period, which LSL warned threaten to stall the growth in buyers.

It said the average purchase price for a first-time buyer rose 8% in the last year to £146,726 in July, with deposits now representing a far greater proportion of the income of a first-time buyer.

LSL put the figure at equal to 83.1% of annual income, up 5.0% on July last year.

David Newnes, director of LSL Property Services, said: "There is simply not enough housing stock to match continued demand.

"If supply fails to keep pace with demand the housing market will become increasingly unsustainable.

"Prices will rise sharply, and future first-time buyers will be left in the lurch."

He added: "There is a desperate need for further cheap property in order for the run of success to continue."

Recent data has revealed a strong increase in the construction of properties as firms build on the improving economic outlook but analysts say the progress amounts to little in terms of supply against high demand.

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