Average price paid by a First-Time Buyer jumps almost a third in five years
Average price paid by a First-Time Buyer jumps almost a third in five years, according to new research by reallymoving, as First-Time Buyers now account for 51% of all home movers, down from 54% a year ago.
First-Time Buyers in the UK are paying almost a third (30.5%) more for their first home than they were five years ago, with the average purchase price jumping from £216,000 in 2018 to £284,000 in 2023, according to research by reallymoving.
By comparison, ONS data shows average UK wages have increased by just 11.6% over the same period, highlighting the growing affordability gap being faced by First-Time Buyers alongside higher interest rates and stricter lending criteria, creating a ‘perfect storm’ of challenges.
Despite a weaker economy and quieter housing market, First-Time Buyers have continued to face rising house prices over the last year, with prices paid in Q1 2023 3.2% higher than Q1 2022. Prices dipped following the mini-Budget last autumn but have risen strongly again since the start of this year.
FTB market share in decline
First-Time Buyer activity is essential to the health of the housing market, yet their market share is falling, with purchases by First-Time Buyers accounting for 51% of all home moves currently. This is down from 54% a year ago, based on over 10,700 registrations on reallymoving.
CEO Rob Houghton said:
“The significant increase in the price of a first home and the much slower increase in wages over the last five years lays out in black and white the scale of the challenge for First-Time Buyers.
“Many will be making a deliberate choice to sit on the side lines and hope that prices fall, but our data shows that despite multiple economic challenges, there’s little sign of First-Time Buyer prices softening.
“Trying to time the market can be difficult and if prices do fall, lenders become nervous, usually leading to higher mortgage rates which make it harder to find a loan you can afford.
“The best time to buy is when you personally are ready and able – and plan to stay there for at least 3 to 5 years if you can, to ride out any short-term fluctuations.”
Three-beds most popular with First-Time Buyers
First-Time Buyers are more likely to buy a three-bedroom property than a traditional ‘starter home’ comprising one or two bedrooms. Reallymoving’s data shows that 40.1% of FTBs opted for a 3-bed during 2022, compared to 38.8% choosing a 2-bedroom property and just 12.7% choosing a one-bed, reflecting the changing housing needs of FTBs buying later in life.
Reallymoving CEO Rob Houghton said:
“With the average age of those starting out on the housing ladder now at 32, buyers are choosing larger properties that will accommodate their needs at a later life stage, including home offices and space for children.
“The upfront costs associated with buying a first home now stand at £2,198 on average, and each subsequent move costs £14,207, so First-Time Buyers are weighing up the benefits of saving for longer and then jumping the first rung or two of the ladder if the budget allows.”
North West region sees the largest price hikes since 2018
First-Time Buyers in the North West of England have seen the largest price increases over the past five years, with the average purchase price rising 39.4% from £155,000 in 2018 to £216,000 in 2023, closely followed by the East Midlands, where the average First-Time Buyer purchase price has risen 31.7% over the same period. In comparison, average FTB purchase prices have increased by just 16% in London and 13.6% in the South East since 2018.
London remains the most expensive place to buy a first home, costing £463,000 on average, yet it’s also the top FTB activity hotspot, accounting for 19% of all new homebuyer purchases, followed by the South East (15%) and the North West (12%).
Reallymoving’s Rob Houghton said:
“Price increases have been higher in the Midlands and North over the last few years than in London and the South East, the traditional engine house of the UK housing market.
“With homebuyers in the south reliant on larger and more expensive mortgages – and often the generosity of the Bank of Mum and Dad – house price growth is likely to remain constrained for the time being.”
Demand for Shared Ownership jumps
As the Help to Buy scheme closed to new applicants on 31st October 2022, demand for Shared Ownership properties increased to account for 11.5% of all First-Time Buyer purchases in December 2022 and 10.1% in January 2023, up from an average of 8.5% between January and October 2022.
However, this surge was shortlived and demand has since fallen back to more normal levels, with Shared Ownership accounting for 8.1% of FTB purchases in March and 7.2% in April. New homebuyers using Shared Ownership are more likely to buy flats (41%) than those buying without the scheme (32%).
CEO Rob Houghton said:
“First-Time Buyers struggling to raise a deposit were more attracted to Shared Ownership when the Help to Buy scheme closed, but demand has since returned normal.
“It can be a great way to get onto the housing ladder but beware that the rent on the part you don’t own can go up – and if the property’s value falls, you could quite quickly end up in negative equity.
“Shared ownership works best for people who are buying for five years or more, who are better placed to ride out any short-term fluctuations in the market.”
Kindly shared by reallymoving
Main article photo courtesy of Pixabay
