Even though house prices have seen a 9% increase in 2021, the highest number of first-time buyers since 2002 have made the step onto the housing ladder. This is a staggering 35% more first-time buyers in 2021 compared to the previous year.
These figures have been released by the Yorkshire Building Society, who have taken their figures for up to October 2021 and estimated the figures for November and December. Their report shows that in 2021, over 406,000 first-time buyers purchased a home, which is 50% of all house sales where a mortgage was involved.
While the number of first-time buyers didn’t reach the levels of 2002, where 531,800 properties were sold to new owners who were new on the housing ladder, the number is still staggering. Especially given the record highs in average house prices the past year have shown.
Clearly, new buyers have not been deterred by the price of a typical first-time buyer home, which has increased by 9% to £222,997 in the year to October
Yorkshire Building Society
Why Were There So Many First-Time Buyers In 2021?
One suspect might be the stamp duty holiday. While, most first-time buyers don’t pay stamp duty, if they buy a property at £300,000 or less. If they could afford a house for £500,000 or more, the saving will have been considerable. And even with a house price of between £300,000 and £500,000, some savings were still to be had.
What did certainly help, however, was the Help to Buy scheme. Its aim was to help people get on the housing ladder, even with low deposits. But what it really did, was providing first-timers with access to lending deals with good rates.
The pandemic had a lot to do with why we had so many first-time buyers in 2021. Lockdowns and working from home orders meant, that many first-time buyers, who lived in rented properties were crammed in and had no or limited access to private outside space.
This has led to a general surge in people looking for more space inside and outside the house, but especially among first-time buyers.
With flexible working becoming more common, people were also no longer tied to offices and cities, as they could work from home. Even if just for parts of the week. This meant they could look for more space and a change of lifestyle in more rural settings, where they could afford more for their money.
The Lockdowns had another effect. People were spending less and saving more, which has led to some first-time buyers being able to increase their deposits.
According to the English Housing Survey (EHS), over 60% of first-time buyers in 2021 were in high-income groups. And the Bank of England has reported that during the pandemic, these groups have seen the biggest improvement in household income. So again, they could increase their deposits.
How Will This Affect The Housig Market In 2022?
2022 is likely to look differently, though, the number of first-time buyers in 2021 will not stay stable. Already, towards the end of 2021, the number of properties on the market began to decrease. And this trend will very likely continue.
It is predicted that there will be a national shortage of property to buy in 2022.
And with the current disruption in supply chains, new buildings will take longer to complete. Materials such as bricks are in high demand and short supply globally. A wait of 32 weeks is the norm at the moment.
This shortage of properties but still high demand, will drive up the prices. This means that first-time buyers will now have to pay £275,000 for a house that last year was bought for £250,000. So, unless the first-timers in 2022 have access to the Bank of Mum and Dad to help increase their deposits, they will find it difficult to get onto the housing ladder this year.
In the near-term housing demand will continue to exceed supply, however with prices at an elevated level in comparison to local earnings, this should dampen activity. Therefore, it’s unlikely that we will continue to see first-time buyer numbers at this level in 2022 and beyond.
Yorkshire Building Society
Another reason why 2022 won’t have that many first-time buyers is the problem with properties affected by cladding, fire safety issues or design defects. This issue is said to amount to £50 billion. The reason this is an issue for first-time buyers, is that 10% of newly built flats won’t get a mortgage. Which means that there will be a decrease in available properties on the market of 10%.
This will make the property shortage even worse.
The recently announced tax rises will result in a decrease in available money for many would-be first-time buyers. Inflation now stands at 5.1%, which causes the Bank of England to increase lending rates, which means more expensive mortgages.
All these factors will make it unlikely that the number of first-time buyers in 2021 will be repeated in 2022.
