First-time buyers forced further from London

Londoners end up purchasing in cheaper areas, including Thurrock, Basildon and Luton

Aspiring homebuyers living in London are increasingly making their first purchase outside the capital as they hunt for ways to offset the high costs of property.

The proportion of would-be first-time buyers based in the capital who are purchasing outside London has nearly doubled in five years, from 16 per cent in 2013 to 31 per cent in the year to date.

The research was compiled by estate agent Hamptons International, which records the prior residence and destination of all buyers and whether they are buying for the first time, moving up the ladder or renting to tenants. Its findings were based on data going back a decade, including nearly 7,000 first-time buyer purchases in the first half of 2018.

Most first-time buyers who leave the capital are typically staying close by, with 13 per cent buying in Thurrock, 10 per cent in Basildon and 5 per cent in Luton — locations with good transport links into the city and lower house prices than areas to the south or west. Similar considerations appear to influence those deciding to stay in London, with Barking & Dagenham, Waltham Forest and Havering being the most popular boroughs for first-time buyers.

However, the proportion of London-focused first-time buyers has also been rising compared with home movers and other types of buyer, reaching 47 per cent of all London homes in the year to date, versus 41 per cent in 2013 — a factor Hamptons said was partly explained by a concurrent fall in the number of competing buy-to-let purchasers.

Landlord purchases have fallen by £5.2bn or 30 per cent in 3 years, according to the agent. The biggest drop was in the Southeast, where there were 45 per cent fewer landlord purchases in the first six months of 2018 than in the same period in 2015.

Aneisha Beveridge, head of research at Hamptons International, said: “We know that transactions are not doing well at the moment, but first-time buyers are making up a bigger part of the market than they have done for quite some time.” That was particularly true in London, she added, where higher stamp duty and lower-yielding investments had deterred landlord investors.

The research comes as UK Finance, which represents mortgage lenders, said the number of first-time buyers had reached its highest level since June 2017. Some £6.1bn was lent to these buyers in August, 5.2 per cent more than in the same month last year.

Yet the affordability barrier to London’s first-time buyers has become harder to overcome in the past five years: house prices in the capital are up 34 per cent in the year to date compared with the first six months of 2013, according to Land Registry.

Andrew Montlake, director at mortgage broker Coreco, said: “Although there are still issues around raising a deposit for many without help from the Bank of Mum and Dad, first-time buyers generally are benefiting from low interest rates and more choice in the mortgage market, as well as schemes such as Help to Buy.

“We expect the current trend of first-time buyer growth to continue into next year, with the remortgage market maintaining its importance.” UK Finance said the average first-time buyer was 30 and had a gross household income of £42,000.

Analysis of the top end or prime market by Hamptons revealed another shift, as young high-income renters in expensive central London areas such as Kensington & Chelsea were increasingly leapfrogging conventional “second stepper” home purchases in outer boroughs such as Chiswick or Richmond and heading straight for larger properties in the Home Counties.

Ms Beveridge said: “These people aren’t just moving a couple of miles down the road. They’re moving much further out and buying the five-bedroom home in the country.”

Financial Times February 2019