First-time buyers are shunning one-bedroom flats in favour of larger three-bed homes, according to research which found aspiring buyers are prioritising the “dream home” over gaining a toehold on the property ladder.
Only 10 per cent of first-time buyers sought a one-bedroom property in 2019, while two-fifths of aspiring buyers set their sights on a three-bed home in spite of the expense entailed in buying a larger property, according to analysis by property website Zoopla.
Two-thirds of first-time buyers across Great Britain sought a house rather than a flat. Some 34 per cent wanted a two-bed property and 42 per cent were gunning for a three-bed home, counter to the idea that competition among first-time buyers was concentrated on smaller properties.
Richard Donnell, Zoopla research director, said first-time buyers were thinking longer term and refusing to compromise on the type of home or its price. “First-time buyers are thinking about staying in a property for 10-12 years rather than a shorter period. They’re aiming higher and want to save up and get a first home they can grow into.”
In the past, first-time buyers would more commonly have started with a smaller home and moved to successively larger properties, relying on rising house prices and wages to support a move, as well as the effect that high inflation had on eroding their debt.
“If you go back to the 1980s and 1990s when interest rates and inflation were higher, people were buying with a shorter four to five-year time horizon. Today, first-time buyers are reluctant to go lower down the market just to get on the housing ladder,” Mr Donnell said. Higher transaction costs are another factor limiting the appetite for successive purchases, particularly for buyers on their second or third home in a higher price bracket.
Zoopla researchers looked at first-time buyer inquiries on more than 600,000 homes listed on the site in the 12 months to June 2019. The analysis logged email or callback requests made by first-time buyers to estate agents, rather than online browsing activity.
The average age of first-time buyers has climbed as rising house prices in many parts of the country forced those on average wages to save for longer for a housing deposit.
The English Housing Survey, produced annually by the Office for National Statistics, compared the characteristics of first-time buyers in 2015-16 with those 10 years earlier. It found first-time buyers were not only older — the average rose from 31 to 33 — but they were more likely to be couples. The proportion of first-time buyer households with children increased from 23 per cent to 37 per cent over the same period.
They were also more likely to have help from the Bank of Mum and Dad. In the 10 years to 2015-16, the proportion of first-time buyers getting help with their deposit rose from 22 per cent to 29 per cent.
Buyers are more likely to trim their sails in expensive markets such as London and the surrounding areas, as affordability rules constrain their ability to get a mortgage. Zoopla found that 26 per cent of first-time buyers in London were aiming for a three-bedroom home, compared with more than 50 per cent in Wales, the Midlands and the Northwest. Two-bed flats were the dominant property type sought by aspiring owners in the capital.
Even in these higher priced markets, though, first-time buyers have become an important force. In Newham, Harlow, Basildon, Barking and Basildon — places with a reputation as “value for money” markets around the capital — first-time buyers were responsible for more than half of inquiries about property purchases.
“First-time buyers typically want to buy where economies are strong and growing, and near where they’re going to be working,” Mr Donnell said.
The number of mortgages taken out by first-time buyers reached a 12-year high in August, according to UK Finance. However, the number of longer-term loans being taken out has also increased, as buyers have looked to pass affordability tests by spreading out the loan repayments over 30 or even 40 years.