Home Residential PropertyFirst-Time Buyers First-time homebuyers face steepest challenges in UK housing market for seven decades

First-time homebuyers face steepest challenges in UK housing market for seven decades

23rd Apr 24 9:22 am

The Building Societies Association (BSA) has released a report revealing that first-time buyers are having to confront the most formidable challenges in the UK housing market in seven decades.

Increasingly relying on high dual incomes or parental support, many young Brits are unable to afford homes and remain stuck renting.

With UK mortgage rates still at record highs and renting costs having surged by 9.2% in the last year, the BSA report indicates a decline in homeownership among young people over the past two decades.

The UK’s rising deposit costs and mortgage interest rates have exacerbated Britain’s affordability issues, with The Resolution Foundation noting a shift in living arrangements. As more young adults live with their parents rather than being in couples with children, parental financial assistance now averages £25,000 among first-time buyers.

This news will cause concern for Generation Stuck – those currently unable to buy a home and leave the rental market – with data from Cornerstone Tax – the UK’s leading property tax experts – revealing that a staggering 42% of renters fear that they will be stuck renting of the rest of their lives.

David Hannah, Group Chairman of Cornerstone, highlights that whilst clear affordability issues remain in the housing market, this fall, alongside speculation of an interest rate cut later in the year, could mean that there is a glimmer of hope on the horizon for those currently stuck in the perpetual cycle of renting.

Cornerstone’s research report highlights the dire need for change in the rental market, which has been marred by rising prices and increased competition. Notably, 17% of tenants report losing out on their desired rental properties due to bidding wars within the last two years.

The situation is also desperate for those who are lucky enough to secure a property, with a staggering 19% of Brits saying they have had to change rental properties more than five times in five years because of landlords and not through any fault of their own.

The escalating cost of renting has been a significant driver of change in the rental market, with the average cost of rent increasing by 8.3% over 2023; a figure buttressed by soaring interest rates and landlords passing on their escalating expenses to tenants.

As a result, 15% of buy-to-let landlords have decided to exit the sector, as revealed by Cornerstone’s research. The tax advisory firm cites the mounting costs as a primary reason for selling their rental properties.

Furthermore, the survey uncovers that 18% of potential buy-to-let landlords have been discouraged from entering the market due to increased regulations and rules. This growing reluctance of buy-to-let landlords to enter the market will only serve to exacerbate the supply and demand issues which are currently causing upward pressure on prices and bidding wars due to the lack of stock.

Group Chairman of Cornerstone Tax, David Hannah said, “The relentless surge in interest rates by the Bank of England last year severely compromised the affordability of mortgages and affected buyers’ spending capacity.

“Yet, amid this challenging landscape, the latest report from Halifax may provide those stuck in the rental market with a glimmer of hope. Speculated interest rate cuts and the first recorded drop in house prices in six months, may suggest that affordability issues could subside towards the end of the year and early 2025.

“So, while the road ahead may seem uncertain, it’s important to remember that even in the face of a challenging market, the property market can adapt and rebound, offering opportunities for those who remain vigilant and strategic.”

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