Recent and aspiring first-time buyers

The full findings of this year’s English Housing Survey (EHS), showing housing market characteristics for 2015-16, reveal that while first-time buyers are getting older and their incomes higher, the appetite for home-ownership from tenants remains undimmed.

First-time buyers (FTBs) are vital for the health of the wider housing market as they provide liquidity – allowing existing home-owners to move and create housing chains. But longstanding demographic factors have led to changes in the characteristics of first-time buyers.

Many of these factors pre-date the financial crisis and help colour in some of the findings of the EHS survey, including:
  • Strong inward migration into the UK since the late 1990s, especially amongst younger age groups;
  • An ageing population, with the median age in the UK expected to increase by 6 years by 2080, and the share of over 65s to exceed a quarter of the population;
  • Couples marrying later than in previous generations, and having children at an older age;
  • And individuals remaining in higher education for longer and forming households at a later age.

The survey finds that while the average age of an FTB has been largely unchanged since 1995-96, the age distribution has shifted. There are fewer very young (16-24 year olds) and older (55 or over) FTBs compared with 10 or even 20 years ago.

Bar chart first time buyer

Source: English Housing Survey (2015-16), Survey of English Housing (earlier years)

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The change at the younger end is likely to be down to a number of factors. An important one is that aspiring home owners have to save for longer for their deposit, as house prices have outpaced incomes for much of the past 20 years. This also means the proportion of FTBs comprising dual income households has increased, from 66% a decade ago to 74% in 2015-16.

Another consequence of rising house prices is that the distribution of those getting onto the housing ladder is slowly becoming concentrated amongst those with higher incomes. The EHS results shows that the top two income quintiles now account for nearly two-thirds (65.8%) of FTBs, compared with 58% a decade ago.

Despite all of this, aspirations amongst those in the private rented sector have not been dented, as 59% of private renters expected to buy at some point in the future. This proportion has remained stable since 2006-07. This finding is similar to our own research, which indicates that current aspirations for homeownership are in line with 30 year averages.

70% of the private tenants who do not expect to buy cited affordability constraints. Half of those (47%) who said they had considered applying for a mortgage but had not yet done so felt they did not have a large enough deposit.

Many of the issues surrounding first-time buyers will be covered in more detail in our upcoming research project.  Due in August, this will provide a wide strategic overview of how government policy influences and interacts with housing.

Kindly shared by CML