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Steven Roskin discusses trends in the first-time buyer market in Property Today

February 2023

Director Steven Roskin explores trends in the first-time buyer market, and the factors affecting it.

Steven’s article was published in Property Today, 02 February 2023, and can be found here.

The UK residential property market has faced changes and challenges in the last few months, and this has led to a quieter period for estate agents and solicitors compared to the hectic market of the previous couple of years.

In the aftermath of the initial covid shock and stumble to the property market, we saw a very buoyant two years of transactions aided by the stamp duty holiday and the desire of people to move to different locations and property types. This was always going to taper off at some point, but it perhaps did so quicker than expected with the combination of increased cost of living, economic uncertainty and the infamous mini-budget which saw mortgage interest rates rise much more sharply than had been anticipated. Transaction levels gradually decreased between October 2022 and January of this year, and HM Land Registry records show the number of applications for transactions for value was 15% less in December 2022 compared to the previous December.

First-time buyers have of course been affected by the recent turbulence and have faced the biggest challenge of everyone in the last year: to get onto the property ladder. A few factors have contributed to this, and in the short term, the changes in the mortgage market have certainly played a part. Those that have worked hard to save a deposit have suddenly found themselves needing a larger deposit to get a mortgage. Many of them have also had to re-assess what they can afford, as increased mortgage rates meant monthly mortgage costs being hundreds of pounds more than they would have been six months ago.

At one stage, it was reported widely in the media that mortgage rates could reach 6-7% later this year, around three times higher than they were in the summer of 2022.

When adding in the increased cost of living, and in particular the energy costs associated with owning a home, it is not surprising that first-time buyers would have needed to pause and take stock before taking that big step in their lives of owning a first property. Other factors such as the ending of the government Help to Buy scheme in October 2022 (for new applications) meant assistance and incentives are currently harder to come by.

Despite these challenges we are still seeing first-time buyers active in the market and more generally there has been signs of an increase in interest and transactions as January has progressed. Estate agents that I have spoken to have reported being busy with viewings and ultimately deals being agreed including with first-time buyers. Perhaps the stock taking has largely concluded and an acceptance has set in that higher mortgage rates are here to stay but at least not looking likely to reach as high as was initially feared. The general principle remains that the UK is a country where aspiration for property ownership has always been strong. In addition, renting remains expensive, especially in the cities and so while the goal posts might have been shifted, the aspiring first-time buyer would understandably want to still get on that ladder.

To achieve this, it may require for the time being and in current circumstances that buyers stretch themselves that little bit further in terms of deposit and monthly mortgage payments. Some may need to make a new or amended application to the ‘bank of mum and dad’ to help them get what they want. There has also seemingly been a shift to more of a ‘buyer’s market’, meaning negotiation of price might be easier than it has been for the last couple of years.

Another change recently reported by lender Halifax showed that in the last decade there has been a noticeable increase in the number of buyers joining up to purchase a first property together. The report showed that 63% of first-time buyers purchased in joint names in 2022, compared to 43% in 2014. This is presumably down to property price increases generally in that period and the greater need to pool together resources to get on the ladder amongst younger buyers. It is nonetheless another example that while adjustments in expectations and circumstances may affect buyers and the market, the desire to buy and own property remains prevalent, and first-time buyers continue to be an active and important part of the market. The need for good financial and legal advice for these buyers is as great as ever, but first-time buyers are likely to remain as a high proportion of those buying, lending and driving the market forward.