The property landscape in the UK is being revised with considerable changes. Between January to August, a 22% decrease was noted in first-time home buyers, compared to the same time frame last year. This piece of concerning information is courtesy of the mortgage lender, Halifax. The same source points out that first-time buyers accounted for over half (53%) of all agreed-to home loans in the first eight months of this year, reflecting a similar trend to the year prior (52%).
According to Kim Kinnaird, director of Halifax Mortgages, the average age of individuals purchasing their first property in the UK has risen by two years over the last decade, landing on 32.
The Rise of ‘Fixer Uppers’: Trends in Property Demand
It seems many are turning to homes in need of renovation. An extensive review conducted by Rightmove of more than 600,000 properties on their website, shows that these “fixer uppers” are currently the most sought-after type of property. In addition to being 8% cheaper than the average property market rate, or saving buyers a solid £29,000, they also present an opportunity for customization.
This trend contrasts with those targeting newly refurbished homes, who face a 19% premium – almost an extra £70,000. Home buyers after renovation projects are particularly interested in homes fitted with new boilers, double-glazed windows and a loft conversion. Additional features such as storage space, chain-free availability and a garden or proximity to stations also contribute to their appeal.
A trend of interest for renters has been the prioritization of double glazing, smart technology, and being close to a station, which tend to generate the most demand.
The Impact of Increasing Interest Rates on the Property Market
The Bank of England has been fighting the high inflation rates since the end of 2021, amounting to a total of 14 incrementations of the interest rates, reaching a peak of 5.25%. This cycle was broken last week, stirring hopes amongst potential buyers that the climax in borrowing costs may have been attained.
These escalating costs have hit the south-east region the hardest, already burdened with the second-most expensive average property costs in the UK. It suffered a 25% drop in the number of people buying their first home this year, closely succeeded by London and East Anglia, both down by 24%, according to Halifax.
A Glimmer of Hope: Strengthening Income and Reduction in House Price to Income Ratio
Despite these seemingly unfavourable factors, there is a shine of optimism for first-time buyers. A strong income growth in recent times has caused a reduction in the house price to income ratio for first-time buyers from 5.8 in June last year to 5.1. This indicates that the affordability of getting onto the property ladder has improved to its best since June 2020.
The average deposit required for a first home is currently £54,116, making up 19% of the property’s price. This is a stark contrast from £31,060 in 2013, which was 21% of the property’s price then.
Regional differences are also evident, with London first-time buyers needing to shell out a substantially higher average deposit of £113,078. Comparatively, those in the north-east are averaging smaller deposits of £29,184.
Looking Forward: Prospects for First-time Buyers
Despite the trend, becoming a homeowner as a first-time buyer still holds considerable importance and potential benefits. As Kim Kinnaird suggests, the predicted further decrease in house prices this year couples with stronger income growth, countering higher interest rates. Many see this as welcome news. As an example, the average cost of a first property in Scotland is £100,000 less than the UK average, offering attractive options for first-time buyers.