Market comment by Ian Street, associate director of Hamptons International.

Interestingly, and possibly against preconceptions, affordability has improved over the last two years for first-time buyers in England and Wales who are finding that they are able to save up for a deposit six months quicker than they were two years ago.

It actually takes the least amount of time to save for a deposit than it has done for around ten years - good news for sellers as first-time buyers all too often start sale transactions moving.

This change has mainly come from a slowdown in house price growth, which is expected to continue (particularly in London), coupled with rising incomes - easing affordability pressures. This combined with low interest rates and fading inflation has made it quicker for first-time buyers to save up.

The Help to Buy equity loan scheme, introduced in 2013, has also helped first-time buyers onto the housing ladder or second steppers looking to move on. In fact since its introduction Help to Buy has helped over 195,000 households in England.

Such has been its popularity that over half (52%) of new build homes sold in the first three quarters of 2018 were backed by Help to Buy, the highest level since the scheme began. This compared to just 34% of new home sales in 2014. Yet some markets are more reliant on the scheme than others.

Numbers of overseas investors have also increased as they take advantage of the uncertainty in the property market caused by Brexit, and the weak pound to purchase high end homes in Great Britain. This shift in demand from UK buyers to foreign buyers since the EU referendum in 2016 continued, particularly in the capital with 57% of homes bought in prime central London being purchased by an international buyer in H2 2018, the highest level in six years and above the 40% recorded pre-referendum (H2 2015).

House prices, particularly at the top end of the housing market have softened, and foreign buyers seem to be making the most of these discounts along with a weak sterling which seem to be outweighing Brexit uncertainty. A property that would have cost an EU buyer £1million in H1 2016 effectively cost £124,000 less in H2 2018 due to sterling’s depreciation alone. This represents a 12% discount, ignoring house price falls in some prime locations, which offer further savings.

Although international buyers are less prominent further outside of the capital and into the country, their levels have also been rising. International buyers purchased 8% of homes in prime country locations last year, up from 6% in 2017. However, the future role of international buyers in the housing market will depend, to a degree, on what form the proposed changes to stamp duty for foreign buyers takes.

The government’s proposal of a 1% stamp duty surcharge on top of existing rates is unlikely to dissuade foreign buyers purchasing prime homes in England, but it could impact those purchasing cheaper homes, particularly as investments.

Currency movements, uncertainty and future expectations of house price growth are more important factors.