"A change in the mix of buyers is supporting market conditions with sustained demand from equity rich existing owners seeking more space and a change in location."
The data shows that Covid-led market uncertainty, combined with a decline in high-LTV mortgages, is starting to impact the scale of first-time buyer demand and their ability to purchase a home.
The latest figures from Zoopla show that the share of homes purchased by first-time buyers in the UK has fallen for the first time in five years, following a 10-year high in the share of sales to first-time buyers recorded in 2019.
Despite a spike in demand amongst first-time buyers when the English housing market reopened, demand has trended downwards over the last two months and is now back in line with pre-Covid levels. Zoopla says first-time buyer demand is set to weaken further over the rest of 2020 and into 2021.
Figures show that in September 2020 compared to Q1, demand amongst first-time buyers has grown the least in London (1.8%), Yorkshire and the Humber (4.8%), and the North West (9.7%). By contrast, Scotland (83.5%), the East (66.2%) and the South East (65.8%) have all registered the highest increases of demand amongst homeowners.
Conversely, demand from existing homeowners shows no sign of weakening and remains 37% higher than pre-Covid levels and 53% higher than this time last year.
House prices growth continues on an upward annual trajectory of +2.6% as demand outpaces supply. At a region and country level, the annual rate of growth ranges from 1.7% in the North East to 3.3% in the North West, Yorkshire and the Humber, and Wales. Nottingham and Manchester and recording price inflation of over 4% per annum.
As the housing market continues its recovery following the impact of Covid-19 and the 50 day market closure in England, the strength of demand has seen new sales agreed outperforming the same period in 2019 by 3%. However, Zoopla believes it’s unlikely that 2020 will recover the sales lost to the market hiatus due to the three to four month lag time between sales agreed and legal completions and, ultimately, it expect sales to run 15% below 2019 levels by the year end.
Richard Donnell, research and insight Director at Zoopla, said: “Housing market conditions remain strong as new restrictions are introduced to control the spread of Covid. These changes are likely to continue to support housing demand in the near term as the importance of the home grows. However, the housing market will not remain immune to the impacts of weaker economic growth and rising unemployment.
“A change in the mix of buyers is supporting market conditions with sustained demand from equity rich existing owners seeking more space and a change in location. In contrast, first-time buyer demand is weakening. FTBs have been a driving force of housing sales over the last decade. They remain a key buyer group but lower availability of higher loan to value mortgages and increased movement by existing home-owners means a shift in the mix of home buyers into 2021.”
