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A record third of sales go to first-time buyers in Q1 – Hamptons

  • 01/04/2024
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A record third of sales go to first-time buyers in Q1 – Hamptons
The share of property sales to first-time buyers reached a high of 33% in Q1, owing to improved affordability due to lower mortgage rates, data from an estate agency group showed.

Data from Hamptons revealed this was up from 29% of sales to first-time buyers last year. 

This is also double the share of sales to first-time buyers in Great Britain since 2014. Hamptons said the return of higher-loan-to-value (LTV) options and lower interest rates had helped more people get onto the property ladder, as well as changes in the buy-to-let (BTL) space. 

Unaffordable areas that were particularly affected by higher interest rates have seen the largest rise in first-time buyer activity, especially across the South of England. 

The biggest increase was seen in London, where half of all homes sold so far this year were to new homeowners. This was up on the 41% share in 2023 and 28% segment in 2014. 

First-time buyers paid an average of £422,660 for their homes in London during Q1, which was 5% or £19,000 more than last year. 

However, when accounting for higher borrowing costs compared to the pre-2022 period, the average first-time buyer in London spent £108,710 less on their first home than they did in 2020, when rates were more affordable and they were able to borrow more. 


Regional changes in first-time buyer homeownership 

In the South East, there was a 9% annual increase in the share of homes bought by first-time buyers, who bought 34% of homes in the region. Again, this was more than double the proportion recorded a decade ago, when this accounted for 13% of sales. 

The only regions to see a drop in first-time buyer purchases compared to last year were Wales and the North East. However, Hamptons said because homes were more affordable in these regions, improved affordability had less of an impact on activity. 

There were 19 local authorities across Great Britain where first-time buyer sales made up more than half of all sales. Some 15 of these were in the South of England, while seven were in London. 

This compares to 10 years ago, when Slough was the only local authority where more than half of the homes sold were to first-time buyers. 


Smaller homes, larger mortgage payments 

First-time buyers are adjusting to affordability constraints, Hamptons data showed, and buying smaller homes. For the first time since 2011, more than half – 51% – of first-time buyers purchased a home with one or two bedrooms. 

This was up from 49% last year. 

Some 28% of first-time buyers also bought a flat in Q1, up from a recent low of 24% in 2022. 

Hamptons said that, if the rate of purchases continued, there would be 363,000 new homeowners this year, which would be the highest number since 2009. 

However, because of worsened affordability, first-time buyers will spend £3bn less on their first homes than they did in 2021, but be paying £796m more in mortgage payments in their first year as a homeowner. 

A typical first-time buyer with a 90% loan to value (LTV) mortgage over 30 years will pay £13,977 on year one mortgage repayments in 2024, £1,524 more than they would have paid in 2021 for a larger home. 

Aneisha Beveridge, head of research at Hamptons, said: “In a bid to escape the heated rental market, first-time buyers have dominated the sales market this year, making up a record third of all purchasers.

“This unprecedented move comes despite a limited package of government support measures. Instead, with high mortgage rates curtailing their ability to borrow, most are compromising on a smaller home to get a foot onto the housing ladder.” 

She added: “The market continues to be dominated by those who can afford to buy, rather than those who want to. And the pick-up in first-time buyers this year is, in part, making up for the lost moves in 2023.

“Longer term, in a similar fashion to post-2008 when the removal of high-LTV lending put purchases out of reach for many, unless rates fall markedly, homeownership will be restricted to the most affluent households, reversing the decade-long increase in first-time buyer purchases.” 

Earlier this month, it was reported that the average mortgage term for first-time buyers had risen to 32 years.

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