Share of first-time buyer sales hits record high

The share of homes purchased by first-time buyers so far this year has been pushed to record levels, but most are going for smaller homes.

Research by Hamptons shows that lower mortgage rates have led to first-time buyers accounting for a record third 33% of all buyers across Great Britain during the first quarter of 2024.

This figure has risen from 29% in 2023, which set the previous milestone, as improved affordability conditions have helped unlock moves from those who couldn’t afford to buy last year.

Over the past decade, the share of homes bought by a first-time buyer in Great Britain has doubled, from 17% in 2014.

London saw the biggest increase, according to the research.

First-time buyers purchased a record 50% of all homes sold in the capital so far this year.  This marked a 9% uplift from the 41% recorded in 2023 and is up from 28% a decade ago. 

Lower mortgage rates and rising real incomes meant that first-time buyers spent an average of £422,660 on their new home in the capital, 5% or £19,000 more than last year.  However, high borrowing costs compared to pre-2022 meant that the typical London first-time buyer spent £108,710 less than they did in 2020 when mortgage rates were more affordable, boosting their ability to borrow more.

London has also seen some of the biggest rent rises over the last few years, encouraging more discretionary renters to become homeowners.

The South East, the second most expensive region in the country, also saw a 9% year-on-year increase in the share of homes bought by first-time buyers.  They purchased 34% of homes sold in the region this year, more than double the proportion (13%) in 2014.

Wales and the North East were the only regions where the share of first-time buyer purchases fell since last year.  These are some of the most affordable areas to buy a home in Great Britain, so improving affordability conditions have had a smaller impact.

Overall, there were 19 local authorities across Great Britain where first-time buyers made up over half of all buyers this year.  Fifteen of these were in the South of England, seven of which were in London.  A decade ago, Slough was the only local authority where over half of homes were bought by a first-time buyer.

However, the high rates mean buyers are limited in how much they borrow and are purchasing smaller homes.
 
For the first time since 2011, more than half (51%) of first-time buyers purchased a home with one or two bedrooms.  Last year, 49% bought two-bed homes or smaller, while the majority of new homeowners bought a larger home.  Similarly, 28% of first-time buyers purchased a flat this year, up from a recent low of 24% in 2022 when the post-Covid race for space was in full swing.                               

If first-time buyer purchases continue at this rate, we’re set to see 363,000 new homeowners across Great Britain this year.  This would mark the highest number since at least 2009, Hamptons said.

Aneisha Beveridge, head of research at Hamptons, said: “In a bid to escape the heated rental market, first-time buyers have dominated the sales market this year, making up a record third of all purchasers.  This unprecedented move comes despite a limited package of government support measures.  Instead, with high mortgage rates curtailing their ability to borrow, most are compromising on a smaller home to get a foot onto the housing ladder.

“The market continues to be dominated by those who can afford to buy, rather than those who want to.  And the pickup in first-time buyers this year is in part, making up for the lost moves in 2023.  Longer-term, in a similar fashion to post-2008 when the removal of high loan-to-value lending put purchases out of reach for many, unless rates fall markedly, homeownership will be restricted to the most affluent households, reversing the decade-long increase in first-time buyer purchases.”