Number of first time buyers smashes record – ‘extraordinary’ surge in pandemic sales

House prices: Expert discusses 'interesting' pricing differences

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Latest estimates suggest first time buyer transactions reached 408,379, according to Yorkshire Building Society. This represents a 35 percent increase on 2020 with first time buyers now making up half of all home purchases. The last time first time buyer transactions stood over 400,000 in a year was 2006, with the highest ever peak being 531,800 purchased in 2002. After the financial crisis, first time buyer numbers fell considerably, reaching a low of 188,000 in 2011.

Nitesh Patel, strategic economist at Yorkshire Building Society, called the figures “extraordinary” given the backdrop of uncertainties around lockdown.

Factors include falling unemployment, low borrowing costs and the stamp duty holiday which has enabled buyers to use more money for their deposit.

Deposit sizes have increased since the pandemic, also partly due to the increase in savings and drop in expenditure as a result of lockdowns.

Between 2019 and the second quarter of 2020, the proportion of households’ disposable income being put into savings rose from seven percent to 27 percent.

Borrowing costs also remained low for nearly all of 2021, with the Bank of England not putting up interest rates until December.

Even then, with an increase to 0.25 percent the base rate remains low by historical standards.

First time buyers have also not been deterred by rapid house price growth which saw average prices rise over 10 percent in some areas in 2021.

Nationally, the typical cost of a first time buyer home rose to £222,997 in the year to October 2021, an increase from £204,230 a year earlier.

Yorkshire Building Society note buyers in high value areas such as London and the South East will have benefited particularly from stamp duty relief applied to properties between £300,000 and £500,000.

Mr Patel cautioned: “In the near-term housing demand will continue to exceed supply, however with prices at an elevated level in comparison to local earnings, this should dampen activity.

“Therefore, it’s unlikely that we will continue to see first-time buyer numbers at this level in 2022 and beyond.”

Data also out today from the Bank of England suggested the housing market was beginning to settle to pre-pandemic levels.

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October saw borrowing slump considerably as buyers raced to complete purchases before the end of the stamp duty holiday in September with November’s figures seeing a slight improvement on this.

Nevertheless, net borrowing in November came in at levels below the 12 month average to June 2021.

Joshua Raymond, director at financial brokerage XTB, said: “What we are starting to see now is extenuating circumstances being flushed out of the data, and in the coming months we will get a much better picture of the state of the UK housing market.”

Looking into the 2022, Paul Gerrigan, CEO of broker, warned it could be a “challenging time for the property market” given the combination of inflation, rising interest rates and higher cost of living.

He predicted: “There will be sustained demand throughout the next few months, and with a low supply of new homes coming onto the market, property prices are likely to rise.”

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