First-time buyers are paying more for their first homes than they were a year ago, according to new research from Zoopla.
The average price of a first home now stands at £229,000, up 2.4% in the past year, almost double the 1.3% increase seen across the broader UK property market. The property website’s analysis shows that first homes are rising in price faster than the wider market in nine out of 11 UK regions.
The North East has seen the biggest jump, with first-home prices up 10.2% in the past year, compared with a 2.4% rise across the broader market. Scotland, Yorkshire and Humber, and the North West have also seen sharp increases in first-time buyer property prices, with prices in these regions up 6.4%, 6% and 5.1% respectively.
First-time buyers are the largest group of homebuyers, making up 39% of all home sales and nearly half of all new mortgage lending (49%), Zoopla said. Nearly half of first-time buyers (45%) are keen to purchase three-bedroom houses, while 29% want to buy flats.
Affordability improves but London remains challenging
Although first-time buyer property prices are rising more quickly than house prices more broadly, those hoping to get onto the property ladder for the first time are benefiting from improving mortgage affordability.
This has boosted buyers’ borrowing power by around 20%, according to Zoopla, which in turn has led to a 30% jump in first-time buyer mortgages. The changes to affordability mean that some buyers are considering higher-value homes, particularly in more affordable regions of the UK.
However, London’s first-time buyers continue to face steep affordability challenges.
While first-time buyers across the UK generally focus on homes priced around 15% below the local average, this gap rises to 21% in London and the South East. Buyers in these areas are deliberately seeking lower-priced properties to stay within their borrowing limits and account for extra costs such as stamp duty.
Richard Donnell, Executive Director at Zoopla, said: “First-time buyers have enjoyed a 20% boost in affordability over the past six months. This has allowed many to consider higher-value homes in more affordable parts of the country, which is helping drive faster house price growth in those regions.
“However, in London and southern England, buyers are targeting cheaper homes despite their increased borrowing power. The end of stamp duty reliefs has pushed up costs, while large deposits and strict lending rules mean higher incomes are still essential. This continues to weigh on house price growth in the South.”
