First time buyers and parents investing in listing for their offspring going to university are among the factors boosting the residential housing market in Wales, a new report suggests.
Across Wales first time buyer numbers are up, particularly in the new build markets in Cardiff and Newport, according to the latest spotlight report from real estate firm Savills which covers the South of Wales.
Savills deal book data for South Wales shows 49% of buyers were aged under 40
in 2014 and other sources confirm the trend, with the Council of Mortgage Lenders (CML) data for Wales covering the final quarter of 2014 showing a 14% year on year increase in loans to first time buyers compared to a 4% rise in home mover loans over the same period.
Official data also shows that the Help to Buy Wales scheme has assisted almost 1,400 completions since it was launched in January 2014 of which 74% were sales to first time buyers.
Indeed, the average age of buyers in the scheme is 30, with an average sale price of £178,000. Some £48.7 million of the available £170 million funding has been spent so far, and a Government announcement on the possible extension of the scheme beyond the scheduled March 2016 closing date is expected later this year.
The report explains that along with the boost provided by Help to Buy, the wider economic recovery has led to an improvement in market sentiment, with potential buyers more confident and finding mortgage availability much improved.
‘Help to Buy can also be credited with opening up the idea of purchasing a new build for younger buyers who may not have considered it previously,’ the report added.
According to the report flats are the most popular new build product in Cardiff, due to first time buyers and downsizers both being key markets. In Cardiff flats make up over 70% of the new listing sales recorded by the Land Registry in the year to February 2015 compared to 15% across Wales as a whole. Even in the cities of Swansea and Newport less than a quarter of new homes are flats, reflecting the unique nature of Cardiff’s market.
The report also says that in Cardiff it is the city’s universities that are a key driver of activity, with parents buying listing for their student children. ‘Good yields and strong demand for rental listing around the university sites mean that these are often kept as investments following graduation,’ the report says.
It also points out that Cardiff is expected to have the fastest growing population in Wales, according to the official projections, adding over 20,000 households a year on average over the next 25 years. ‘Our projections show a majority of these will be added in the private rented sector. The number of households in the private rented sector in the city doubled between 2001 and 2011, and we expect that further increases are likely,’ the report added.
Indeed, Cardiff is leading the way in the country’s housing markets. House prices in Cardiff have recovered more strongly than the Wales average at 4% below peak, according to Land Registry figures from March 2015. The average sale price of new build listing in Cardiff in 2014 has been around £240,000, more than 20% above the Wales average.
There are proposals to allocate land for over 40,000 new homes in Cardiff up until 2026. This includes several major urban extensions and the report says that there is some concern that there will be an oversupply of new housing if those allocations come forward at the same time.
Overall the outlook for the South Wales market is mixed. ‘Positive aspects include the continuing economic recovery and an increase in buyer confidence. We expect the London market to cool off, which is often a cue for activity, and prices in the other UK regions to pick up as demand ripples out,’ the report says.
‘In addition, the recent changes to stamp duty may provide a small boost to the Welsh market. In the cities of South Wales demand is expected to be particularly strong as the area is set to grow its population faster than the rest of the country,’ it adds.
The report also explains that the Welsh Government’s household projections indicate that average household size is on a downward trend so extra demand may be highest for one and two bedroom listings.
‘On the negative side, reforms to mortgage lending criteria may lead to a reduction in lending. The mainstream markets in Wales are dependent on mortgage finance so this may be a drag on price growth. Some areas saw strong rises through 2014 so the scope for future growth is more limited,’ the report says.
‘Overall, we expect growth in second hand prices for Wales of more than 15% over the five year period from 2015 to 2019, below the UK average but higher than London. Given Cardiff is the economic centre of the region, it is best placed to outperform other locations,’ it concludes.
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Source: Property News Spain