High rents push more first timers into buying

The property market could be emerging from the downturn, Zoopla says.

Annual house price growth remains just 3.0 per cent according to the portal’s latest market snapshot but it says buyer demand has hit a 2023 high, 66 per cent more new properties have hit the market, and sales are ahead of the five-year average.

Analysing the figures, Sarah Coles - a leading analyst at business consultancy Hargreaves Lansdown - says the rental market has had a role to play.

“First time buyers are helping to prop up the market. Runaway rents are up 11 per cent in a year, and the number of rental properties has collapsed, so rent hikes are far from over. The prospect of rents becoming an ever-increasing burden is pushing people into becoming first time buyers.

“Renters are also likely to place higher value on being able to fix a mortgage, so they’ll know what they’ll pay over the next few years. Where they’ve been forced to move by a landlord who is putting the house up for sale, they’ll also be drawn by the prospect of being in control of deciding when they next move home.

“Taking the first step onto the property ladder is by no means easy.

“Buyers need an average income of £55,900 to buy a three-bedroom home - which is up £7,350 since 2020. In the South East and London, it’s even more of a stretch, because first time buyers need an additional £12,150 of income to buy the same property. It’s not just the deposit that’s a difficult stretch for buyers, because when you add in the impact of rising mortgage rates, they have enormous ongoing monthly costs too.

"Fortunately, they’ve had a leg up in this department, because wages are currently rising faster than house prices – up 6.6 per cent in the year to February excluding bonuses. It makes saving for a deposit and paying bigger mortgages at least marginally more feasible.”

Coles says a healthy dose of realism is also easing the sales process.

“Sellers are being more pragmatic about pricing from the outset, with just under a quarter needing to cut the price after coming to the market with too much optimism. Buyers are also prepared to compromise. Although three-bedroom properties remain the most commonly bought property among first time buyers, we’ve seen a real growth in sales of two-bedroom properties too.

“However, it’s worth putting this in the context of other measures. Annual price rises are similar to yesterday’s Nationwide figures for April, but figures for demand are strikingly different to the RICS survey for March.

“That one showed buyer demand, sales and house prices were down yet again. And while we don’t yet know whether this turned around in April – it would be a massive reversal of trends that have settled in for months. It may mean these positive signs aren’t replicated across the market.”