First-time buyers can expect to pay more for their first home than a year ago, according to new analysis from Zoopla. The average price of a first-time buyer home is £229,000, a 2.4% increase over the last year. This is higher than the average UK home price increase of 1.3%.
Mortgage affordability has improved over the last six months, giving all buyers using a mortgage 20% more borrowing power. This is one reason behind a 30% increase in first-time buyer mortgages and also explains why first-time buyers are targeting higher value homes than a year ago in more affordable regions.
First-time buyers are a significant group in the property market, accounting for 39% of all sales each year and half of all new mortgages for home purchases (49%). Zoopla’s data shows first-time buyers are primarily focused on buying three-bedroom houses (45%), while interest in flats is decreasing (29%).
The price of homes first-time buyers can expect to pay is rising faster than the overall market in nine out of 11 UK regions. This is most pronounced in the North East, where prices for first homes are up by 10.2% in the last year, compared to just 2.4% for the wider market. Other strong performers include Scotland (6.4% vs 2.1%), Yorkshire & Humber (6.0% vs 1.9%) and the North West (5.1% vs 2.7%).
However, in expensive areas like London, first-time buyers are still facing an uphill battle. To cope with higher prices and increased costs of stamp duty since reliefs ended in April, they are looking at buying homes that are 2.4% cheaper than a year ago.
Driven by the reality of affordability, first-time buyers typically target homes priced 15% below average prices within local areas, with them targeting home values that are 21% below average in London and the South East, and 17% in Wales. In these regions, first-time buyers aim for a larger price difference to secure a home that aligns with their income and mortgage eligibility including stamp duty costs.
Richard Donnell, executive director at Zoopla, commented: “First-time buyers have had a 20% boost to affordability over the last six months. This is enabling them to look at buying higher value homes in the more affordable parts of the country which is supporting faster house price growth across the board.
“In contrast, first-time buyers in London and southern England are looking for cheaper homes than a year ago despite the extra borrowing capacity. The ending of stamp duty reliefs since April has added to the cost of buying a home for first-time buyers. Large deposits and mortgage regulations mean a high household income is needed to buy in southern England where affordability remains a challenge and this is acting as a drag on house price growth across southern England.
“The variation in affordability explains why first-time buyers across England are looking to buy three bed houses while in London, one and two bed flats remain the primary target for those buying their first home.”
