Stories of the rise of buy to let and the apparent demise of first time buyers continue to grab the headlines. Many have linked the two, blaming the ‘affluent’ investor for competing with the ‘financially stretched’ first time buyer for the same low priced housing.

But this is only part of the story, as according to FDPSavills, buy to let mortgages represents only a small fraction of residential transactions.

Undoubtedly failing pensions and investments, have led many to turn to bricks and mortar as a long-term safe bet, says a research report from FDPSavills. Low interest rates and strong house price growth have combined to make buy to let an attractive proposition and as such, we have in recent years, witnessed a period of major expansion in this area of the market.

It may therefore come as some surprise to discover that in spite of the column inches devoted to it, buy to let mortgages represented just 7% of the total residential transactions last year.

In contrast first time buyers accounted for 23% of transactions whilst, the majority of sales, 50%, were represented by previous homeowners looking to move.

Interestingly, however, cash buyers, representing 20% of all residential transactions, made up a significant proportion of buyers, almost equalling those purchasing their first home. And yet little is known about this major player in the property market and importantly whether he or she is an occupier or investor.

Richard Donnell, head of FPDSavills Residential Research comments: “what we do know however, is that there is clear evidence that cash investors have been buying up significant numbers of properties in many lower value parts of the country, typically below £50,000.”

“This unregulated cash fuelled investment buying could well be the driving force behind the current high rates of house price growth in some northern parts of the country.”

“House price indicies are not able to track such cash-buying activity yet our gut feeling is that as much as a fifth of cash sales last year were to investment buyers.”

This makes the cash buyer almost as important as the buy to let mortgage sector and when added together – the cash and mortgage investor – accounts for 12% of all property transactions last year.

However, this said, the rising investor numbers cannot account for the decline of 168,000 first time buyers in 2003. The first year to see such a fall in numbers.

Richard Donnell again, “We put the decline in the proportion of first time buyers down to a combination of demographics, affordability and confidence factors.”

There is no doubt that affordability constraints are limiting buying activity, especially in areas such as London and the south east where even a 5% deposit can amount to a sizeable sum of money.

Neither should the role played by demographics be underestimated. We are half way through a major decline in the number of first time buyers with the number of 25 to 35 year olds – accounting for half of all first time buyers - steadily declining since 1996.

All this combined with the fact that if ever there was year to put confidence factors to the test, then 2003 was it. The war in Iraq and media speculation that house prices were likely to collapse inevitably led many buyers to delay entering the property market.

As Donnell concludes, “We believe that take-up from first time buyers will gradually improve gradually throughout 2004, but that as a group their proportion will remain lower than the long term average. It is true that investors have played some part in their decline, but this is far from the full story.”