UK house sales: demand from movers set to outpace first-time buys

First-time buyers have been a “driving force” for the UK property market over the past decade but according to new data, the proportion of sales to newcomers is on track to be overtaken by those to existing homeowners.

The latest House Price Index Report from Zoopla says that the annual UK house price growth rate stands at 2.6%, up from 1% a year ago. And the number of new sales agreed over the past nine months is 3% higher than the same period last year, despite the sector having had to shut down for the coronavirus lockdown earlier this year.

But while an ongoing imbalance between supply and demand is driving the growth rate, a gap is “opening up in relative strength of demand between existing homeowners and first-time buyers”, which has recently been greater among the latter, the property portal reports.

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Experts predict that “first-time buyers will make up around 33.9% of home purchases in the UK for 2020, down from a ten-year high of 34.9% in 2019”, says The Guardian.

If correct, that would “mark the first decline in house sales to first-time buyers since 2015”, the newspaper adds.

The Zoopla report points to “restricted mortgage availability, tighter lending criteria and growing economic uncertainty” during the Covid pandemic as the key reasons for the expected drop.

The property site’s research and insight director Richard Donnell said: “First-time buyers have been the engine for the housing market over the last decade, but greater movement amongst existing home owners means a shift in the mix of moving households in 2021.”

‘Existing home-owners to support market’

First-time buyer demand spiked immediately after the lockdown ended, but has lost momentum amid the growing economic uncertainty and reduced availability of higher loan to value (LTV) mortgages.

“We expect it to decline slowly over the rest of 2020,” says the Zoopla report. “In contrast, demand from existing home-owners was slower to respond immediately after the lockdown but remains elevated - 37% higher than pre-Covid levels and 53% above this time last year.

“There is pent-up demand in this group that we believe could support the housing market into 2021.”

Demand from first-time buyers over the past ten years had been buoyed by the Help to Buy scheme and greater competition in the higher LTV mortgage market.

In 2019, first-time buyers overtook mortgaged home-owners as the largest buyer group. However, Zoopla says this trend is “set to reverse” moving into 2021, as existing homeowners look to up sticks and take advantage of government incentives such as a stamp duty holiday.