During recent years the driving force behind housing sales can be laid squarely at the feet of first-time buyers. Not only do they restrict the amount of new property available, they are also buying more and more property every year, with 8 consecutive years of sales growth. This has totalled a growth of 85% since 2010 and has outpaced all other groups. Furthermore, last year they were the largest purchaser group, accounting for 36% of all sales, and over half of all mortgages home purchases.
Data from Hometrack however shows that these increases are not a blanket rule over the whole of the UK. In fact, in London the number of first-time sales has fallen, by 12% in the last 5 years. And there is evidence to suggest that this has only been kept at a 12% decline due to Help to Buy schemes, which accounted for 13% of all First-time purchases.
This has gone hand in hand with the growth, and therefore price points, of property that first-time buyers are purchasing. Looking at affordability levels the average income needed for first time homeowners ranges from £35,000 per household in the North West to £75,000 per household in London.
Other factors show that first time buyers are trending towards longer term mortgages, and more expensive property purchases. The average mortgage term is now 30 years, compared to 25years in 2009, and property purchased by first time buyers is getting more expensive. The gap between average price in the UK and first purchases has been narrowing for over 20 years, with current purchases only 8-15% lower.
The research shows that whilst other areas of the housing market will be affected by the political and financial insecurity, the biggest property purchasing group is wholly driven by affordability and policy changes around stamp duty values. Therefore, whilst the rest of the market can remain murky there is strong evidence that First Time purchases will have strong growth in areas like the midlands and north west. On the flip side purchases in London and the South East are expected to remain flat or decrease further.
This means that for investors targeting property growth and therefore capital gains, there are still stable and confident growth pockets that can be targeted, regardless of Brexit or other changes to the UK housing Market. However careful consideration needs to take place as to where and what type of property is purchased, to not only provide strong yields, but also be attractive to the largest group of property purchasers.