Good News for First-time Buyers?

A confluence of various economic challenges has made it hard for first-time UK buyers to step on the property ladder. House prices, for instance, have stood in the way for some buyers, particularly those seeking housing in London and other prime urban areas. Slow wage growth has also been a factor, leaving full-time workers behind the curve, unable to cover costly mortgages. Even setting by an adequate deposit has been problematic, limiting the number of young buyers with enough in reserve to contemplate a house purchase.

Without getting help from mum and dad or taking other extraordinary measures, would-be buyers simply haven’t been able to put all the financial pieces in place to join the ranks of home owners. According to recently released figures, that trend may be turning around.

Buyers Break Through Financial Challenges

Not everyone aspires to own a house. But for those who do, everything needs to line up for successful transactions to unfold. If you need a short-term loan, it’s easy enough to select from a number of providers, without facing a formal credit check. If you’re in the market for a house, on the other hand, you’ll need a long-term mortgage and a hefty deposit, which are subject to scrutiny. Even the most committed would-be buyers have been turned away from ownership in past years, but 2017 was a breakthrough year for first-timers.

In all, 365,000 first-time home buyers made their way onto the property ladder in 2017. The figure represents the highest total since 2006, offering encouragement for others to follow. UK Finance identifies the rise as an increase of more than 7 per cent over the prior year.
House prices rose by 5.2 per cent in 2017, but according to the Office for National Statistics (ONS), the homes bought by first-time owners only rose in value by 4.8 per cent. The buy-to-let market was generally seen as less robust, compared to results seen in other areas of the market.

On average, first-time buyers were around age thirty, with household income of approximately £41,000, whether earned individually or as a buying couple.

Cautiously, some analysts see December’s weakening numbers as a sign that the growth trend isn’t likely to carry over throughout the current year. This could result in fewer sales to first-time buyers in 2018, than occurred in 2017.

Data shows movers were older and had higher household earnings than first-time buyers, averaging age 39, with incomes of £55,000. UK homes cost an average of £226,756, according to the ONS figures, which grew faster than general consumer prices. Accounting for inflation, UK house prices are thought to have increased by 22 per cent between 2012 and 2017.

The five-year house price increase illustrates that obstacles still remain for first-time buyers, whose earnings have not kept pace with rising house prices. And conditions are not uniform across the UK. London properties, for example, far outpace the average, settling at £484,173, on average. Although pricey, London’s home values experienced a relatively low level of increase last year, rising by only 2.5 per cent. Elsewhere, in Scotland, which showed the highest single year climb; house prices rose by 7.7 per cent, to an average of £149,000.

More than 30,000 first-time buyers joined other UK owners on the property ladder in December, but the number actually lags behind figures from the same month, a year earlier. For that reason, some analysts are skeptical about a sustained rally for first-timers, who’ve had a rough go since the global financial meltdown.

Whether you see a glass half empty or believe it’s half full, it’s hard to scoff at the positive movement in the UK housing market. No matter how you slice it, more than 350,000 first-time home buyers reached an important milestone in their financial lives, last year.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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