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Will it ever get better for first time buyers?

Over the past year we’ve seen tens of thousands of people lose their jobs. We’ve seen businesses up and down the country cease trading and we’ve seen enough uncertainty to last most of us a lifetime. 

At the moment the forecasts are that the UK economy will be back to pre-Covid levels by the second or third quarter of next year – assuming, of course, that there is no ‘third wave’ of the virus next winter. 

With all that going on – with the UK at one point facing the deepest recession for 300 years – there is surely one certainty in the financial world: house prices must have declined last year. Surely, at last, more first time buyers than ever must have had a chance to get a foot on the housing ladder. After all, there wasn’t just the pandemic, there was also the uncertainty of Brexit…

In fact, the opposite happened. Nationwide’s House Price Index for March showed that house prices were up 5.7% on a year-on-year basis, with the average house in the UK costing £232,134. After a year of lockdowns, house prices were still rising. 

For first time buyers – young people looking to get a foot on the housing ladder for the first time – rising prices over the past year must have come as a real blow. In fact – with young people the demographic most likely to have been affected by the pandemic in the jobs market – it has been the proverbial ‘double whammy.’ 

So is the position for first time buyers likely to improve? 

There are some grounds for optimism. The Chancellor’s stamp duty holiday is due to end on September 30th. As a consequence, the Office for Budget Responsibility expects house prices to fall by 1.7% next year. The forecasting organisation Oxford Economics, however, is suggesting that the fall will be between 4% and 5% in 2022. 

Will that be the case? Some pundits believe that as the housing market has stood up to the pandemic reasonably well, it will do even better as the economy starts to recover.

There are also regional factors to take into account. Many people have used the period of lockdown to reassess their lives and where they want to live. The BBC recently reported an ‘explosion’ in demand for property on England’s south coast and on the Welsh coastline. First time buyers in these areas are likely to face competition from people buying second homes or relocating from cities and downsizing. 

The Chancellor sought to give first time buyers a further boost in his March Budget, with the mortgage guarantee scheme providing government backing for 95% loans on both new builds and existing homes. But as the economy ‘bounces back’ first time buyers may need further help still in order to find a foot on the housing ladder. 

Sources
https://www.cityam.com/uk-set-for-very-rapid-growth-over-next-quarters-says-boes-broadbent/

https://www.nationwide.co.uk/-/media/MainSite/documents/about/house-price-index/2021/Mar_Q1_2021.pdf

https://www.cityam.com/house-prices-new-build-homebuyer-demand-explodes-on-englands-south-coast-and-in-wales/

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