Demand for rented homes looks set to increase in the coming months as new data suggests that many people who do not yet own property will not do so for quite some time.
The gap between income and house prices has sky-rocketed in recent years with various reports suggesting that a growing number of younger people are giving up the idea of ever owning their own home for now.
The latest forecast from Zoopla shows that the share of homes purchased by first-time buyers in the UK looks likely to drop for the first time in five years – making up around 33.9% of home purchases in the UK for 2020, down from a 10-year high of 34.9% in 2019.
First-time buyer demand and their ability to purchase property is starting to be impacted by Covid-19, the recession, and reduced availability of higher loan to value mortgages.
Weaker demand amongst first-time buyers correlates directly with when lenders started to withdraw high loan-to-value mortgage products in early June, according to Zoopla.
Last year, around a fifth of all mortgages for home purchase were at or above 90% LTV. Reduced availability of mortgages at or over 90% LTV – as lenders meet increased demand at mid to lower LTVs – is a primary factor behind this weakening demand.
Richard Donnell, research and insight director, Zoopla, said: “A change in the mix of buyers is supporting market conditions with sustained demand from equity rich existing owners seeking more space and a change in location. In contrast, first-time buyer demand is weakening.
“First-time buyers have been a driving force of housing sales over the last decade. They remain a key buyer group but lower availability of higher loan to value mortgages and increased movement by existing home-owners means a shift in the mix of home buyers into 2021.”
The remainder of 2020 and the start of 2021 are set to witness a reversal of the first-time buyer market dominance with a greater share of moves by existing home-owners who tend to move less often.
Nisha Vaidya, mortgage expert at Bankrate UK, said: “It’s telling that even with schemes like Help to Buy and the stamp duty holiday, potential first-time buyers are withdrawing from the property market.
“The Covid-19 pandemic has changed the rules of the game, as low deposit mortgage deals have disappeared and house prices have soared. At a time when wealthy homeowners are upgrading their properties, first time buyers are getting left by the wayside.”