How first-time buyers are skipping a step on the ladder

First-time buyers used to take a cautious step on the property ladder, purchasing a flat or a small starter home as their first foray into ownership, for example.

Yet with many first-time buyers saving longer and buying later what they are looking for as their first property is changing, with family homes increasingly in demand.

Flats, once the initial step to property ownership for many first-time buyers, have lagged other property types, with more than two-thirds of one and bedroom flats listed this year still unsold, according to Zoopla’s June House Price Index. This is a continuation of a long-running trend.

The price gap between flats and houses is substantial, remaining at a 30-year high. Average house values are 1.7 times the price of a flat in the UK or 2.7 times excluding London.

Demand has shifted and, outside of the capital, more than half (52%) of buyers want a three-bedroom house, up from 44% in 2017 according to Zoopla.

So why the gap?

Running costs

For some, the desire for a house comes as they try to avoid the added running costs of flats, such as service charges and ground rent. There are, however, steps by the government to revamp this system with the Commonhold and Leasehold Reform Bill – which would cap ground rents and ban the sale of new leasehold flats – expected to be introduced to Parliament in Autumn 2026.

Affordability

Affordability also plays a role, especially by region. In areas such as the Midlands and the north the affordability of houses means that many first-time buyers simply bypass flats and move straight to houses.

Increasing age of FTB

Another factor is the increasing age of first-time buyers. A report by the Institute for Fiscal Studies, published earlier this year, showed that the share of 25-to-34-year-olds still living with their parents rather than renting or buying somewhere of their own has increased by more than a third in nearly two decades. For many, this will be part of a plan to save more for deposits.

Planning ahead

The fact that they are buying later means they are more likely to target family homes, with research from Barclays Property Insights suggesting that more than a fifth of millennials, aged between 28 and 43, bought properties with more bedrooms than they currently needed.

The desire for a forever home is evident among younger buyers too, with 33% of Gen Z buyers, aged 18 to 27, opting for a forever home to avoid moving, according to the Barclays research.

Better market conditions

Market conditions for first-time buyers are also better than 18 months ago, with a wider choice of homes for sale, lower mortgage rates and sellers motivated to negotiate on price. Couple that with improved financial education and relaxed affordability criteria and their first home becomes even more accessible for first-time buyers, whatever type of property they choose to buy. Cowell Norford buy, sell and let properties in Rochdale, Oldham and Bury, offering exceptional levels of service and knowledge that result in better outcomes for our clients.

Contact us to find out more. 

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