Property statistics reveal a new peak in service charges
In a surprising turn of events, the number of first-time buyers in 2024 has hit a record low, marking a significant shift in the UK's housing market. This decline, contrary to popular belief, is not a result of a surge in first-time buyers, but rather a combination of affordability issues, economic headwinds for younger generations, and supply constraints.
Affordability has improved the most in cities like Bristol, Oxford, Portsmouth, and Cambridge, but these improvements have not been enough to counterbalance the high home prices and mortgage rates that continue to soar, making entry into homeownership difficult for young buyers. In fact, prices soared during the pandemic and have yet to come down significantly, while mortgage rates are the highest in over 20 years.
Millennials and especially Gen Z face higher unemployment, student debt, and other economic setbacks, causing them to be more cautious about buying a home due to market volatility and prior financial crises. The average age of first-time buyers has increased, reaching around 36 to 38 years in 2024, higher than in previous decades when buyers were typically in their late 20s.
Limited housing supply also plays a significant role in this trend. Although some markets have temporary oversupply, overall more supply is needed to bolster first-time buyer activity.
The effects of this decline in first-time buyers are far-reaching. At 24%, first-time buyer activity is at its lowest since tracking began in 1981, which raises concerns about future market health and economic mobility. The aging of homeowners, with repeat buyers averaging nearly 48 years old, alongside fewer young buyers, slows down the natural turnover and market dynamics.
Persistent barriers to entry suppress demand from new entrants and may lead to longer-term stagnation or affordability crises. Despite the critical role first-time buyers play in market vitality, these barriers have tempered housing market growth and contributed to buyer age increases.
However, not all news is grim. Cities like Liverpool, Aberdeen, Glasgow, and several cities in Northern England, such as Sheffield and Newcastle, remain affordable for single first-time buyers. In Liverpool, the average age of a new homeowner last year was 33 years old, two years older than 10 years ago and the oldest in two decades. The number of first-time buyers increased by 19% compared with 2023.
In Aberdeen, buyers would need to pay an average of £510 per month for a one- or two-bedroom home. The average price of a home brought to the market this month has increased by 0.5% to £367,994, a 'muted' rise for this time of year.
The end of the stamp duty holiday next month has fueled momentum for first-time buyers, with many rushing to complete purchases before the deadline. Almost two-thirds of mortgage completions last year were in two or more names, suggesting that family support plays a crucial role in helping young buyers navigate the challenging housing market.
In conclusion, 2024 has experienced a record low in first-time buyers, not a record surge, due to affordability issues, economic headwinds for younger buyers, and supply constraints. These factors have collectively tempered housing market growth and contributed to buyer age increases.
Personal finance and investing strategies should consider the unfavorable conditions in the UK's housing market, as affordability issues, economic headwinds, and supply constraints have led to a record low in first-time buyer activity. This extended stagnation in the market may pose risks for those looking to invest in real estate, especially in cities with high prices and soaring mortgage rates, such as Bristol, Oxford, Portsmouth, and Cambridge.
In contrast, some cities in Northern England, like Liverpool, Aberdeen, Glasgow, Sheffield, and Newcastle, remain relatively affordable for first-time buyers, presenting potential opportunities for investment in the housing market. However, it's essential to remain cautious and adaptable due to the market volatility and lingering financial challenges faced by younger generations.
