The UK housing market has seen a drastic change in buying trends during the coronavirus crisis. City dwellers have been moving further afield to take advantage of the spaciousness and increased facilities of country living. Renters are seeking larger properties to accommodate stay-at-home lifestyles. Previously popular urban hotspots have been replaced with smaller villages and towns.
Another interesting trend that property websites have been observing is a shift in the likelihood of home buying from first-time buyers to movers.
First-time buyers have long been considered the ‘lifeblood’ of the housing market. However, a recent report by the Resolution Foundation reveals home ownership for first-time buyers could become increasingly difficult in the coming months, with movers more likely to dominate the market.
The housing market saw a temporary rise in demand in July and August, driven by the stamp duty holiday and pent-up buyer demand from months of lockdown. However, the Office for Budget Responsibility predicts this boom is unlikely to last, and that house prices are likely to fall by 11% by the end of 2021. While this usually means properties become more affordable for buyers, particular challenges because of the economic slowdown are set to impede any expected increase in buyer demand.
For one, lenders are expected to increase their upfront deposit requirements to protect themselves against non-repayment. This is likely to make it more difficult for buyers who are still cautiously recovering from the economic downturn to fulfil the requirements. Several households have had to dip into their savings as a result of unemployment or reduced income. Under these circumstances, higher deposits may prevent buyers from being able to purchase new homes.
Additionally, the stamp duty holiday, while ostensibly beneficial, has also removed any advantage of first-time buyers over movers. Before the stamp duty holiday, most first-time buyers did not even purchase a home expensive enough to be charged stamp duty, so they didn’t necessarily reap the benefits of this scheme.
Research and insight director at Zoopla, Richard Donnell, said, "First-time buyers have been a driving force of housing sales over the last decade. They remain a key buyer group but lower availability of higher loan to value mortgages and increased movement by existing homeowners means a shift in the mix of home buyers into 2021."
Indeed, Zoopla statistics show that the number of first-time buyers is slowly decreasing, and the number of movers is holding steady at 37% higher than before the pandemic.
With the additional pressure from mortgage lenders and increasing interest from movers, this dynamic will likely persist into 2021, making movers the primary target market for property retailers in the UK.