Although inflation has hit a 9% high in 40 years and Britons across the country are grappling with the worst cost of living crisis in more than a generation, new research from Stipendium has shown that the number of first time buyers in the UK has increased by 93% over the past decade. Soaring property prices have not been a major deterrent to buyers as the introduction of stamp duty exemption in 2021 has led to increased buyer activity leading to an increase by 46% of first-time homeowners from a year earlier, hitting a new high of 410,000 – the highest annual total seen in the last ten years. Over the same period, the price of an average home for a first-time buyer rose from £141,572 to £216,826, representing a 53.2% increase.
A big contributor to the surge in first-time homeownership appears to be ‘Mom and Dad’s Bank’, with new forecasts from Savills showing that the percentage of home sales for first-time buyers with the help of the family in 2021 rose to 46% with an average contribution of £56,000. Forecasts show that this will continue to rise to 47% in 2023. Prices in the property market are becoming increasingly volatile as an imbalanced level of supply and demand pushes the average asking price to £360,101 – or an increase of £19,082 over the past three months. Buyer inquiries are 65% above 2019 levels and 53% of properties are selling at or above the final advertised asking price.
However, overall property sales began to decline for the first time since the end of the stamp duty holiday in October 2021. Sales in April were 106,780, down 12% from the same period. last year, according to HM Revenue & Customs. The latest decline in home sales is an indicator that the housing market is beginning to cool, which would present an opportunity for first-time buyers. April’s price increase is lower than the 1.4% increase recorded in March according to the Halifax Monthly Housing Index. House price growth is expected to continue to slow due to the Bank of England’s decision to raise the bank rate to 1%.
David Hannah, group president at Cornerstone Tax, explains:
“The introduction of the stamp duty holiday has led to a substantial increase in the number of first-time buyers. It’s inspiring to see the percentage of first-time homeowners rising in a challenging landscape. Even though house prices have continued to climb, I think we will inevitably see a downturn in the real estate market, but it won’t be as big as some think. If we look at what’s happened – the growth in house prices, the inflation in retail prices, the spike in energy prices, this is going to put pressure on employers to increase wages. I think wages will go up, which means real purchasing power won’t go down as much. However, if this does not happen at the required pace, renting or buying property will become increasingly unaffordable in the UK.
“The problem we have is the rate of demand and supply. If builders are building and they are oversupplying, it will dampen the increase and appreciation in asset values. But if the number of people wanting to buy of homes continues to outstrip supply, those prices will go up. That’s exactly what’s happening right now, with just 216,000 new homes being built in 2020/21, well below the target of 300,000 per year. year of government.
“We also have an open market in the UK, which not only means domestic buyers and investors are looking to buy, but we have inbound investors. We also have a number of people moving to the UK. Overall, I expect UK housing demand to continue to outstrip supply – pushing price increases ahead of inflation and provided wages rise, housing affordability will remain unchanged.