First-time buyer market share drops as prices rise

First-time buyers in the UK are paying almost a third more to get on the property ladder than they were five years ago, new research suggests.

Analysis by surveying, conveyancing and removals comparison website reallymoving.com has found that the average purchase price for new buyers has jumped from £216,000 in 2018 to £284,000 in 2023.

Office for National Statistics data shows average UK wages have increased by just 11.6% over the same period.

The comparison website said this highlights the growing affordability gap being faced by first-time buyers alongside higher interest rates and stricter lending criteria, creating what it describes as a “perfect storm” of challenges.

On a regional basis, new buyers in the North West of England have seen the largest increases over the past five years, with the average purchase price rising 39.4% from £155,000 in 2018 to £216,000 in 2023, according to the research.

This is closely followed by the East Midlands, where the average first-time buyer purchase price has risen 31.7% during the same period.

London remains the most expensive place to buy a first home though, costing £463,000 on average and accounting for 19% of all new homebuyer purchases, followed by the South East at 15% and the North West at 12%. 

Prices paid in the first quarter of 2023 by new buyers were also 3.2% higher than the same period of 2022, according to the research.

Purchases by this cohort account for 51% of all home moves currently, reallymoving.com says, this is down from 54% a year ago, based on more than 10,700 registrations on the website. 

First-time buyers are more likely to buy a three-bedroom property than a traditional ‘starter home’ comprising one or two bedrooms, the research found.

Reallymoving’s data shows that 40.1% of this group opted for a three-bed during 2022, compared with 38.8% choosing a two-bedroom property and just 12.7% choosing a one-bed.

Demand for shared ownership has also increased due to the end of the Help to Buy Scheme, reallymoving.com claims.

Its chief executive Rob Houghton said: “The significant increase in the price of a first home and the much slower increase in wages over the past five years lays out in black and white the scale of the challenge for first-time buyers. Many will be making a deliberate choice to sit on the sidelines and hope that prices fall, but our data shows that despite multiple economic challenges, there’s little sign of first-time buyer prices softening. 

“Trying to time the market can be difficult and if prices do fall, lenders become nervous, usually leading to higher mortgage rates which make it harder to find a loan you can afford.”