Rise in the number of UK first-time property buyers expected to continue
First-time buyers were the largest property buyer segment in the U.K. during 2018, and that may continue this year despite increasing affordability pressures, according to Zoopla
First-time buyers were the largest property buyer segment in the U.K. during 2018, and they could rank No. 1 again this year despite increasing affordability pressures, according to a report released Friday in the U.K., from Zoopla.
First-time buyer numbers have been rising since 2010, unlike other buyer demographics, which have seen fluctuations in their growth of the same time period, said the online property portal, which predicts that first-time buyers will continue to account for roughly 36% of total sales this year.
First-time buyers have been the driving force behind the housing sales market in recent years, Richard Donnell, research and insight director at Zoopla, said in the report. He said that lower mortgage rates and improving mortgage availability have supported the growth in first-time buyer numbers across the country.
Despite increased barriers from high house prices in southern England and mortgage regulations, the appetite to buy their first home remains strong, Donnell said. Whilst the outlook is more challenging in London, growth in first-time buyer volumes is expected to be driven in regional markets where affordability remains attractive.
One of the greatest pressures for new buyers is the required deposit, which averages around 15% of the value of a property—twice as much as before the global financial crisis in 2008.
Another pressure facing them is new mortgage regulation, designed to stop households from taking on high levels of debt at a time when mortgage rates remain close to historic lows, Zoopla said.
In order to get a mortgage, a buyer has to pass an affordability test by proving their finances could sustain increased, or stressed, mortgage rates.
Mortgage applications are stress tested at 3% above the policy’s reversion rate, which is the rate after any fixed-rate period or discount has finished.
The typical mortgage rate today is around 2% and the stressed rate is often closer to 7%, Zoopla said.
The challenges mean buyers are taking more of a long-term view of their purchase, Zoopla said. The most popular type of home first-time buyers enquire about on Zoopla’s portal are three-bedroom properties that they can grow into, rather than rushing into buying smaller, lower value homes in order to force their way onto the market.