FIRST TIME BUYERS DRIVING THE MARKET

Can first time buyer numbers keep on rising?

◼ First time buyers (FTBs) have been the driving force for housing sales in recent years. They were the largest group of purchasers in 2018 - 36% of all sales - and are expected to remain so in 2019.

◼ This report examines the key drivers of FTB purchases and outlook. Growth in FTBs is expected to be driven in regional markets where affordability remains attractive, supported by availability of higher LTV mortgages.

◼ FTBs are not trying to purchase lower value homes and appear to be taking a longer-term view.

Zoopla Research

First time buyers driving force for housing sales

In recent years, first time buyers (FTBs) have been the driving force behind housing sales. FTB numbers have grown for 8 consecutive years, up 85% since 2010, outpacing other buyer groups (Fig. 1).

FTBs were the largest purchaser group in 2018, accounting for over a third (36%) of all UK housing sales and half of all mortgages for home purchase. Help to Buy (HTB) schemes have supported this growth and we estimate 14% of all FTB purchases used HTB in 2018.

Fig. 1 – Housing sales by buyer group

Source: Zoopla Research, HMLR, ROS, UK Finance

Numbers rising across all regions except London

FTB numbers have been increasing across all regions except for London although the rate of increase has started to slow more recently (Fig.2). Numbers in London have fallen 12% since 2014, although this is a smaller decline than the 25% drop in overall sales across the London market. This partly reflects support from HTB which we estimate to account for 13% of all FTB purchases in London in 2018.

Fig. 2 – FTB mortgages regionally 2012-2018

Source: UK Finance

Income to buy for FTBs has increased 6-12%

Slower growth in FTB numbers is largely a result of affordability factors. The growth in residential values since 2013 has not been uniform. In areas where prices have grown rapidly the income required to buy, and deposit levels, are relatively high. In areas where price growth has been more modest, affordability levels remain less of a constraint on demand.

We estimate that the household income required to purchase a typical (2-3 bed) FTB priced property (10%- 15% lower than an average home) ranges from £35,000 in the North to £75,000 in London (Fig.3).

Deposit levels have also increased since the global financial crisis averaging 23% of the purchase price today, compared to 9% in the mid 1990’s (UK Finance). The average FTB deposit currently ranges from £26,000 in the North to £140,000 in London.