First-time buyers ditching traditional starter homes and buying three-bedroom properties

6 September 2019

Despite the challenges first-time buyers face they were the largest group of purchasers in 2018

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First-time buyers are skipping the traditional starter home and are moving straight into larger properties, new research shows.

Amajority of first-time buyers outside of London are now searching for a three-bedroom home – leapfrogging past traditional one and two-bedroom flats, according to property portal Zoopla.

Its research shows that two-thirds of first-time buyers were looking for houses in 2018, rising to 80% not including London.

Zoopla says that given the challenges first-time buyers face in the housing market, they are taking a longer-term view and moving into properties they can stay in longer and grow into.

The gap between the average price paid by first-time buyers and all buyers is also narrowing.

In 2018 first-time buyers were purchasing property with average prices 8% to 15% lower than the regional average for all housing. This contrasts with pre-2007, when first-time buyers were buying homes 20% to 25% below the regional average.

To buy bigger homes, more first-time buyers are taking out mortgages with longer terms, averaging 30 years today compared to 25 years over a decade ago.

Richard Donnell, research and insight director at Zoopla, says: “First-time buyers are not compromising on size and price of home. Our analysis suggests that they are taking the long-term view and buying a home with a longer-term horizon than they may have done in the past.

“Three-bedroom homes remain the primary housing type in demand and this drops to two-bedroom homes in London where housing costs and affordability pressures are greatest.”

Challenges

For many first-time buyers, getting on the housing ladder is becoming increasingly expensive.

Soaring deposits and house prices mean buyers require higher salaries in order to take out a mortgage.

One of the most difficult aspects of buying a home for first-time buyers is getting a deposit together.

Deposit levels have increased since the global financial crisis, averaging 23% of the purchase price today, compared to just 9% in the mid-1990’s, according to UK Finance.

Meanwhile, the average first-time buyer deposit currently ranges from £26,000 in the North to £140,000 in London.

Zoopla estimates that the household income required to purchase a typical two to three-bedroom for first-time buyers ranges from £35,000 in the North to £75,000 in London.

Increased mortgage regulation and affordability testing also limits how much banks can lend to first-time buyers.

Despite these challenges, first-time buyers were the largest group of purchasers in 2018, accounting for 36% of all sales.

Mr Donnell adds: “It is not just the high house prices and large deposits first-time buyers need to overcome to reach their goal of buying their first home. Mortgage regulations introduced after the global financial crisis to ensure households do not become over-indebted mean affordability testing creates an additional hurdle.”

Affordability

Recent research from the Post Office using data from the Office for National Statistics has found that 56% of properties across the UK are in areas that are affordable for first-time buyers.

The most affordable area in Blackpool where the average property price is £110,000, compared to the average first-time household income in the North West of £40,053, meaning all properties in the area were classed as affordable for first-time buyers.

Lincoln and Hull also had a similar level of affordability, while Kingston upon Hull, Stoke-on-Trent and Southampton were all affordable to 90% of first-time buyers.

Top 10 most affordable areas for local first-time buyers

CountyCityAverage house price1-yearFTB income% of city affordable
    change  
1LancashireBlackpool£110,000-2%£40,053100%
2Lincolnshire      Lincoln£149,0004%£40.91100%
3East YorkshireKingston upon Hull£115,0004%£38,665100%
4MerseysideKnowsley£163,0005%£40,05395%
5StaffordshireStoke-on-Trent£116,0005%£41,79694%
6HampshireSouthampton£215,0002%£57,55794%
7West MidlandsSandwell£148,0008%£41,79692%
8County DurhamHartlepool£124,9500%£36,67492%
9Greater ManchesterWigan£137,5004%£40,05390%
10Greater ManchesterOldham£130,0002%£40,05388%

Source: Post Office 2019

Comments

They say we had it so good

Well they can't be struggling if they can afford to go straight to 3 bed houses, when we were young we had to make do with a one up one down terraced back to back to do up ourselves and most friends did the same. They say we had it so good, well they are proving that wrong.We never had all the help options buyers today have, higher interest saving accounts tax free, we paid tax at source on any savings interest, 20% interest free mortgage for 5 years paid for by tax payer and the lowest mortgage interest rates ever. They don't know they are born, hope we see 15%+ interest rates again soon so we can earn a bit on our savings and watch them handing back the keys to the lenders like they did in the early 90's and see how they cope.

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