First-time buyers emerge from pandemic property squeeze

Lockdown continues to stimulate demand from older homeowners, who have boosted cash purchases to 30% of all sales, reaching a twelve year high ..

First-time buyers are emerging back into the market after recording a fall in share of sales from their 2018 high, in the wake of 2020’s pandemic-led credit squeeze. As lenders withdrew 90%+ loan-to-value mortgages attempting to de-risk at the onset of the recession, many first-time buyers were forced to put their plans to buy on hold. These are the latest findings revealed by  Zoopla, the UK’s leading property portal, in its monthly House Price Index.

The findings reveled that lockdown continues to stimulate demand from older, more established homeowners, who have boosted cash purchases to 30% of all sales, reaching a ten year high. By contrast, the market share of first-time buyer sales reached its lowest level since 2016 last year, accounting for 31% of sales, down from 35% in 2018. The pandemic coupled with the rapidly shrinking range of high loan-to-value mortgage products squeezed first-time buyers’ purchasing ability, creating a sharp juxtaposition with their previous position as the engine of the housing market.

Despite the cash-fuelled advantage of older, high-equity homeowners, many of whom are not reliant on mortgages in order to move, evidence suggests that first-time buyers are returning to the market, with a 5% rise in demand from first-time buyers in the first six weeks of the year compared to Q4 2020. In addition, sales agreed for properties priced between £100,000 and £150,000, a sector of the market where first-time buyers are typically more active, have risen by 26% from Q4 2020.

Analysis suggests that first-time buyer activity has been boosted by a gradual return of higher LTV mortgages and the ongoing benefit of stamp duty relief that will extend beyond 31st March.

Furthermore, with first-time buyers making a return to the market, this goes some way to explain why demand is enduring while supply is failing to keep pace bearing in mind that first-time buyers have nothing to sell, while some sellers are reluctant to have buyers visit their property during lockdown.

Gráinne Gilmore, Head of Research, Zoopla, comments: “The strong bounce in demand seen at the start of the year has been further boosted by increased numbers of first-time buyers active in the market. Many of these buyers will be taking advantage of the increased number of home loans now available for purchasers with smaller deposits, and most will be less concerned about the ending of the stamp duty holiday on March 31st. First-time buyers have no property to sell, so their increased activity in the market is further pushing up buyer demand ahead of supply. As the growth in demand continues to outstrip the supply of homes, it puts more upwards pressure on prices. We can see this in the +4.3% average price growth in the year to January, matching the highest level of growth seen in nearly four years”.

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