HOMEBUYING INTENTIONS SURGE FOLLOWING RATE CUT

The number of people looking to buy a property in the next two years has risen sharply, spurred by the recent cut in interest rates by the Bank of England. With fifteen per cent of Britons planning to buy a home in the next two years, intentions to move are at their highest level since July 2001.

Of those surveyed before the rate cut on 10 July, 13 per cent planned a move within the next two years. Of those surveyed after the decrease, 16 per cent said they were planning to buy a property within the same period.

This indicates that the housing market remains robust, despite warnings of price falls and increasing regional variations in house price inflation. Men are particularly bullish, with 17 per cent indicating that they are planning a move within two years, compared to 12 per cent of women.

Twenty-somethings continue to drive demand, with three in ten (30 per cent) planning a move in the next two years, up from 27 per cent last quarter and up from 25 per cent in Summer 2002, and this leaps to more than one in three (34 per cent) of people in their twenties questioned after the rate cut.

This surge in young and first-time buyers is reflected in people’s reasons for wanting to move, with the biggest single motivation for moving being a need for independence, cited by more than one in five (21 per cent) Britons on the move. The factor rising most sharply is moving to make money on property, which increased from nine per cent of buyers last quarter to 13 per cent this quarter.

Paul Cooper, Head of Mortgages at Alliance & Leicester, said: “Even without the fall in base rate, the proportion of people looking to move over the next two years rose this quarter. This shows that people are confident that buying property is still a good investment. There can be little doubt that interest rates being at a 55- year low is helping to encourage people to think about buying property.

Cooper added: “We haven’t seen this many people planning to move since the Summer of 2001, when the FTSE was above 5,500 points and before the events of 9/11. This is certainly a good sign for homeowners, despite warnings of a housing market slowdown.”

A&L’s quarterly movingimproving index asked a GB representative sample of 4,000 people whether they intended to buy a new home, and, if so, why. The first wave of respondents was questioned from 26 July and the second wave from 10-13 July. Bank of England base rates were cut from 3.75 per cent to 3.5 per cent on 10 July.

Intentions to move:

• The proportion of people intending to buy a new home in the next two years has risen to 15 per cent, up from 12 per cent last quarter and from 11 per cent this time a year ago. Intentions to move are at their highest since July 2001.
• The cut in interest rates announced by the Bank of England’s Monetary Policy Committee on 10 July led to a surge in intentions to buy a new home. Of the 2,000 people questioned prior to the cut, 13 per cent indicated an intention to move within the next two years. This rose to 16 per cent of the 2,000 people questioned after the reduction.
• The post-rate cut increase was particularly noticeable amongst twenty-somethings. The proportion in that age group planning to buy rose from 26 per cent before the cut to 34 per cent after it.
• Men’s property-buying intentions were more affected by the rate cut. One in five (20 per cent) men said they planned to move after the rate cut,-compared to 15 per cent of men questioned beforehand. Only thirteen per cent of women said they were intending to move after the rate cut compared to 11 per cent beforehand.
• Londoners are the most likely to be buying a new home in the next two years, with more than one in five (21 per cent) planning on doing so, a rise from 16 per cent in March 2003. Conversely, only eight per cent of Scots are planning a move during the same period.

Reasons for moving:

• The need for independence was the single biggest reason for buying a property, with 21 per cent citing this as their key reason, including 35 per cent of freedom-hungry twenty-somethings.
• Those moving to try and make money on their property rose from nine per cent last quarter and 12 per cent in the first quarter of 2003 to 13 per cent now, perhaps reflecting a perceived increase in demand for property.
• Women are far more likely to cite the need for independence as their key reason for moving, with almost one in four (24 per cent) wanting to move because of this compared to less than one in five (18 per cent) men.
• Men are much more likely to be considering a move to make money on the deal, with 15 per cent citing this as their main reason compared to 10 per cent of women.
• Other key reasons to move include wanting more bedrooms (18 per cent), buying being cheaper than renting (12 per cent) and wanting a change of neighbourhood (11 per cent).