Are first-time buyers driving the property market?

publication date: Jan 23, 2017
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Kate's January first-time buyer report

What are the indices saying about first-time buyers?
Here's what the various property price indices are saying about first-time buyers but remember national average prices are often misleading.

Rightmove "Window of opportunity for first-time buyers this new year with more choice and negotiating power:

  • Available stock for sale of two beds or fewer currently up 1.9% versus previous year
  • Fewer buy-to-let investors to compete against and sellers more open to lower offers as sales agreed in this sector down 13.2% in December 2016 compared to previous year
  • Rightmove estimate the average asking price (not necessarily what FTBs paid) for first time buyer properties has increased by 6.4% annually."

Halifax “In 2016 the average house price paid by first-time buyers was £205,170 – the highest on record. Since falling to £135,254 at the height of the housing downturn in 2009, the average price paid by first-time buyers has grown by 52%. In the past year, this average has grown from £191,929, an increase of 7%.”

Nationwide “There has been a marked divergence in house price growth across the UK in recent years, which has translated into a significant difference in affordability across the regions…. The median LTI ratios are highest in London and the South East (at around four times income) and lowest in Northern Ireland (at less than three).”

NAEA “In October there were a record number of sales made to FTBs, when 32 per cent were made to the group. In November, sales to the group fell to 29 per cent.”

For more download our comprehensive first-time buyer price report.

Average price paid for first-time buyer properties

Number of sales to first-time buyers

It’s clear that first time buyers have very much re-established themselves as a core part of the property market since the recovery started post the credit crunch. The Halifax data clearly shows that FTBs (rightly) decided to rent/stay at home rather than buy during the recession, saving them from potential negative equity issues. This was a sensible move, but statistically has artificially driven up the average age of a first time buyer which will hopefully fall back over the next few years.

Although we haven’t fully recovered to pre-credit crunch sales volumes, FTBs are now a major driver of the property market, partly thanks to government initiatives such as Help to Buy, and this will hopefully improve further following the ‘fall out’ of buy to let investors. But the increased demand and not enough properties on the market means that property price inflation for first time buyers does appear to be slightly higher than other properties, when averaged out, around 6-7%. As with all property data, since the credit crunch we are seeing vast differences on a regional basis, so much so that ‘national averages’ for first time buyers are incredibly misleading to consumers and policy makers and should be ignored.

Looking to buy for the first time this year? Download our FTB eBook.

What's happening with first-time buyers in the UK regions?
30% falls in FTBs in London, but 22% falls in more affordable North East  – analysis proves the fall in FTB numbers is  not just due to affordability issues! 

Some excellent data over the last few months shows the huge dangers of reporting property price ‘averages’. The data also shows that the fall in first time buyers is not just down to affordability. Despite affordability for first time buyers improving in the North East over the last 10 years, FTB numbers have fallen by levels not far off to London.

It is also important for the media to be very careful on their reporting of first time buyer numbers and affordability.
For example, some reports have shown that despite affordability issues, the average first time buyer deposit has doubled. What this means is that people CAN put down 2x the deposit than they did in 2006, it doesn’t mean though they ‘have to’ which is often incorrectly reported. This is thanks to families who are now third generation property owners who have the means to help provide increased deposits via the bank of mum and dad.

Looking to buy for the first time this year? Download our FTB eBook.

The Nationwide chart below shows how in several areas including Scotland, the North, Wales, Northern Ireland and the East Midlands, affordability for first time buyers, based on their earnings, shows it is easier for first time buyers to by today versus 6 years ago.

Interestingly though, despite better affordability in Scotland, first time buyer numbers have still fallen by 14%; in the East Midlands by 10%, in Wales by 12% and in Northern Ireland by 9%. However, the most interesting figure is the huge fall of 22% in the North – where affordability has also improved.

This data clearly shows that it isn’t just affordability that is reducing the level of first time buyers, an essential fact for the media to report and policy makers to better understand.

For more download our comprehensive first-time buyer price report.


All our information is brought to you by Kate Faulkner, author of
Which? Property books and one of the UK's top property experts.
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