New research from Hamptons estate agents reveals that the number of first-time buyers leaving London has dropped below pre-pandemic levels. Does this mean, after years of first-time buyers being forced to purchase property in more affordable areas, London’s first-time buyer market is back? And, if so, what’s driving this trend?
First-time Buyers Leading the Charge
It’s not an exaggeration to say that 2024 has proved a bumper year for many buyers trying to take a first step on the property ladder. First-time buyers have purchased a record 50% of all homes sold in the capital this year. It’s a trend we’re seeing nationwide, with 33% of all homes in Britain being bought by first-time buyers this year – nearly double its low point of 17% in 2014. However, the pattern is particularly pronounced in London and the South East.
Bucking a Historical Trend
What makes these figures so interesting is that the trend for first-time buyers to leave London in the hunt for affordability and larger starter homes is long established. For much of the last decade, those who want to buy a first home have been forced to look further afield.
For example, in 2014, just 28% of the homes bought in London were purchased by first-time buyers. And things remained around the same level, until 2023 when that figure crept up to 41%.
In the first half of 2024, Londoners acquired 33,130 homes outside the capital, well below the 2015-19 average of 34,830. Meanwhile, predictions suggest that Londoners will purchase around 76,000 homes outside the capital this year – some 25,000 less than the peak of 100,910 in 2022.
Although first-time buyers made up 30% of those leaving London during the first six months of 2024, a figure that had been creeping up since 2013, it represents a decline on previous years.
Instead, it’s those who already own a home who are increasingly looking to leave London. Almost half – 48% – of those Londoners purchasing property outside the capital are existing homeowners.
Why Is This Happening?
The root cause of this trend is relatively obvious. Mortgage rates have been falling for the last six months as inflation finally begins to ease. Indeed, the average rate for a two-year deal currently stands at 5.49%, its lowest for over a year.
Hamptons estimates that the average first-time buyer purchasing in London spent £443,550 in the first half of 2024 – that’s £39,360 more than in 2023. What’s more, declining mortgage rates mean buyers are paying less. The average London buyer with a 15% deposit could pay £273 less per month than in the same period last year.
This increase in purchasing power, alongside falling prices in many parts of the capital, has unlocked previously unaffordable properties for those new to the market. What we’re seeing is effectively a bit of a mad scramble from everyone who put off buying a first property in the last few years, partly driven by fear that the rates could change again.
On top of this, the number of homeowners choosing to leave London – often in search of bigger, more child-friendly property – may be freeing up some of the existing stock for first-time buyers.
Is the First-time Buyer Market Back?
Now for the answer to our initial question, is the first-time buyer market back? Unfortunately, it’s not that simple.
In one sense, yes. The number of first-time buyers able to afford to stay in London is at it’s highest point for a decade. This looks set to continue as the market works through the backlog of people who’ve been biding their time for the last few years.
However, it’s important to note that the recent upswing doesn’t include everyone who would like to get on the housing ladder. As we mentioned earlier, the current average a first-time buyer spends in London is £443,550, still unaffordable for many in a city where the average salary is £44,000 per year.
The current trend is very much driven by and for the capital’s more affluent residents. And this means the number of people likely to enter the market is finite. Sadly, once the affluent have bought their first homes or rates and prices shoot back up, we’re likely to see a return to Londoners leaving to buy their first home.
The current trend, while encouraging, belies the structural problems within London’s housing market. There are too few genuinely affordable homes for the vast majority of Londoners and without major intervention at the macro level, it’s likely to stay that way.
