First time buyers leapfrogging to forever homes as flats fall out of favour

Data from Barclays has revealed a significant shift in the behaviour of first-time buyers across the UK. Increasingly, individuals entering the property market are bypassing traditional starter flats and opting instead for larger, family-sized homes. Semi-detached properties comprised 33.5 per cent of first-time buyer purchases in August this year, a 1.7 percentage point increase from the previous year. Conversely, the popularity of flats among this group fell by 2.7 percentage points, now representing under a fifth of such purchases.

This change is driven, analysts suggest, by the need for greater space as many buyers wait until they are older and often have children before purchasing their first home. According to the Mortgage Advice Bureau, the average age for a first-time buyer has now climbed to 34, with nearly one in three having children by the time they step onto the property ladder. The preference for more substantial homes is underscored by figures from Hamptons, who found that 73 per cent of first-time buyers this year have chosen a house, a notable jump from 62 per cent in 2020. The trend is particularly marked in London, where half now opt for a house compared with just 37 per cent five years ago.

The drive towards forever homes aligns with financial stretching, as more buyers take out mortgages with longer repayment horizons. Barclays indicates that over 41 per cent of first-time buyers have agreed to repayment terms of 30 years or more. While this provides lower monthly payments, it also raises concerns about mortgage debts potentially extending beyond state pension age, posing a risk for future financial security and retirement planning.

Stamp duty policy is playing a central role, with many first-time buyers aiming to make the most of their one-time exemption. By purchasing a long-term property immediately, buyers avoid incurring stamp duty again on future moves. Jatin Patel, head of mortgages at Barclays, noted that first-time buyers are now considering property from a long-term perspective, rather than merely aiming for an initial step on the property ladder.

The current economic climate, marked by speculation ahead of the upcoming autumn budget, is contributing to a climate of caution for both buyers and businesses. Barclays has observed that both investment decisions and home purchases are being delayed as the public waits to see if any fiscal changes will alter their circumstances. At the same time, the cost of living is biting harder, with mortgage and rent expenditure rising by over 4 per cent year-on-year and a significant majority of tenants anticipating further increases in housing costs.

The evolving priorities and strategies of first-time buyers underscore broader changes in both the housing market and the economic environment. While the dream of home ownership persists, the path towards it and the nature of the homes being purchased are changing in line with demographic and financial realities.