How Covid has affected first-time buyers

The pandemic has made it harder for people to buy their first home, while price growth has meant their choice of neighbourhoods has narrowed.

According to research from Hamptons, before Covid-19 struck, the number of purchases by first-time buyers (FTBs) had been growing steadily for a decade, after being decimated in the aftermath of the global financial crisis. In the first quarter of 2010, 17% of homes sold in Great Britain were bought by a first purchaser but by the first quarter of 2020, that proportion had risen to 27%.

However, the pandemic put paid to this recovery as banks pulled deals for buyers with small deposits. By the final quarter of last year, the proportion of homes bought by first-time buyers had fallen to 21%, back to 2018 levels. It ticked up slightly in the first half of 2021, but fell back to 21% again in the third quarter.

Covid hasn’t significantly altered desired locations

Cities remain the most popular locations, with 28% of going to first-timers in the third quarter of 2021, 2% less than in the same period in 2019. The proportion of homes in small towns or suburbs bought by FTBs has remained static compared to two years ago, at 21%, and countryside properties have gained marginally in popularity – up from 10% to 12%.

However, the increase in property prices since Covid began has meant that first-time purchasers are increasingly buying in a select few locations. The top 30 local authorities for first-time buyer purchases this year account for a third of sales to a first-time buyer, up from a quarter five years ago.

In London, where there have been fewer movers this year, over a third (34%) of homes sold have been bought by a FTB, the highest number for a decade. Indeed, price falls mean 10 of the top 30 first-timer hotspots are now in the capital.

The top London spot for FTBs is Lewisham

Lewisham is on the boundary of Zones 2 and 3 – here, new homeowners snapped up 53% of all homes and paid an average price of £379,180. However, affordability and a desire for space mean FTBs are increasingly looking to London’s outer zones. In both Zone 5 and Zone 6, the share of all sales to first-timers has hit a high of 39% this year.

As the number of mortgage products for those with small deposits increases and as house price inflation slows, it is expected that FTB numbers will recover next year, back to 2019 levels.

Longer-term FTB numbers are expected to remain relatively robust. The current government’s support for homeownership has reversed the growth in the private rented sector and it seems likely to continue, stacking the cards in favour of first-time buyers.