Despite rising house prices, number of first-time buyers increases by 93% over the last decade

New research shows that the number of first-time buyers hit a record high in 2021

David Hannah, Group Chairman at Cornerstone Tax, discusses the increase of first-time buyers and the outlook of the UK property market in 2022

Despite inflation hitting a 40-year high of 9%, and Brits across the country grappling with the worst cost-of-living crisis seen in over a generation, a new study from Stipendium has shown that the number of first-time buyers in the UK has increased by 93% in the last decade. Soaring property prices have not been a major deterrent for purchasers as the introduction of the stamp duty holiday in 2021 saw a surge of buyer activity, causing first-time homeowners to increase by 46% from the previous year, hitting a new high of 410,000 – the highest annual total seen in the last ten years. In the same time period, the price of an average first-time buyer home has increased from £141,572 to £216,826 – representing a 53.2% rise. 

A big contributor to the increase in first-time property owners seems to be the ‘Bank of Mum and Dad’, with new forecasting from Savills showing that the percentage of first-time buyer home sales with family assistance in 2021 rose to 46% with an average contribution of £56,000. Predictions show that this will continue to rise to 47% in 2023. Prices in the property market are becoming increasingly volatile, as an unbalanced supply and demand level pushing the average asking price to £360,101 – representing a £19,082 increase over the past three months. Buyer inquiries are 65% above the levels of 2019 and 53% of properties are selling at or over their final advertised asking price.

However, overall property sales have started to decrease for the first time since the end of the stamp duty holiday in October 2021. Completed sales in April came to 106,780 – 12% lower than the same period last year, according to HM Revenue & Customs. The latest decrease in property sales is an indicator that the housing market is starting to cool which would represent an opportunity for first-time buyers. April’s rise in prices is down on the 1.4% increase in March according to Halifax’s monthly property index. House price growth is expected to continue to slow due to the Bank of England’s decision to raise the Bank Rate to 1%.

David Hannah, Group Chairman at Cornerstone Tax, discusses:

“The introduction of the stamp duty holiday caused a substantial rise in first-time buyers. It’s inspiring to see that the percentage of first-time homeowners is growing in a challenging landscape. Even though house prices have continued to climb, I think we will inevitably see a slow down in the property market, but it won’t be as substantial as some people think. If we look at what has been going on – house price growth, retail inflation, energy costs surging, that’s going to put pressure on employers to raise wages. I believe wages will rise, meaning real spending power will not actually decrease as much. However, if this doesn’t happen at the required rate, the act of renting or purchasing property will become more and more unaffordable in the UK. 

“The problem we do have is the rate of demand and supply. If builders are building and they’re over supplying, it will soften the increase and the appreciation in asset value. But, if the number of people wanting to buy houses continue to exceed the supply, then those prices are going to rise. This is exactly what is happening currently, with just 216,000 new homes being built in 2020/21, falling some way short of the government’s 300,000 a year target.
 
“We also have an open market in the UK which means not only are domestic purchasers and investors looking to buy but we have inbound investors. We also have quite a number of people relocating to the UK. Overall, I expect demand for UK housing to continue to outstrip supply – pushing price increases ahead of inflation and provided wages are increased, the affordability of housing will stay in lockstep.”