UK market suffering from lack of first-time buyers

New research has found that the UK may be facing a possibly serious shortage of first-time buyers, which could be hugely detrimental to the housing market.

A report from mortgage insurer Genworth indicates that the South East and North West regions could be most at risk of a lack of buyers. In addition, first-time buyer activity in the North East and Yorkshire and Humberside is less than half of what it was pre-recession.

Drops

From 1974-2006, the South East averaged 86,733 first-time buyers per year. However, since the financial crash in 2007, this figure has dropped dramatically to 47,863 per year. This has resulted in a total shortfall of 310,967, the most of any English region.[1]

The North West has also seen a significant fall in first-time buyers, falling from 46,461 per year between 1974-2006, to 23,875 from 2007 to 2014, creating a shortfall of 180,685 first time buyers. In the North East, the average total of first-time buyers has been 10,575 between 2007-2014, 46% lower than the pre-recession number.[1]

In the capital, first-time buyers dropped around a quarter in percentage terms. Between 2007-2014, the typical total of 39,175 initial buyers is equivalent to 73% of the pre-recession average.[1]

Denied owners

The report suggests that by comparing these shortfalls to the regional populations of 18-45 year olds, traditionally acknowledged as the typical age of first-time buyers, a significant percentage are being denied home ownership as a result in the drop in first-time buyer numbers.

As an example, a shortfall of 100,927 first-time buyers in the North East compared to a population of 1.3m means up to 21% could potentially be classed as denied home owners.

UK market suffering from lack of first-time buyers

‘Tougher regulation and higher capital requirements for lenders as a result of the recession have accelerated the fall in homeownership and dramatically reduced the number of people, especially younger households, who are able to buy their first home,’ noted Simon Crone, vice president for mortgage insurance Europe at Genworth.

He went on to say that, ‘a dual crisis has emerged with the shortage of new homes exacerbated by a shortage of loans traditionally used to help first time buyers get on the property ladder with 5% or 10% deposits. Our analysis shows that all regions have felt the impact of the squeeze on first time buyers, regardless of the so-called ‘North/South’ divide.’[1]

Lack of supply

Mr Crone continued by saying, ‘while London and the South East face the biggest pressure of high house prices, a lack of housing supply nationwide and limited access to first time buyer mortgages has left many regions with years’ worth of missing owners occupiers.’[1]

Crone notes that, ‘first time buyer numbers remain woefully below where they were before the recession and there needs to be a cohesive plan in place across the UK to address this.’ He observes that, ‘permanent changes are underway to the planning system to get house building going, but the Help to Buy mortgage guarantee remains a temporary solution to support first time buyer aspirations.’[1]

‘Private mortgage insurance is helping building societies to support first time buyers while banks are largely reliant on Help to Buy. It is imperative they consider how to continue supporting first time buyers when that comes to an end. Failure to tackle all elements together threatens to permanently undermine homeownership for future generations,’ Crone concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-first-time-buyers-2015081110847.html