Rising rents force tenants to become first time buyers

Rising rents force tenants to become first time buyers

9:30 AM, 3rd May 2023, About 12 months ago 3

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While house price growth has slowed to 3%, the country’s high rents mean it is cheaper for tenants to buy, research from Zoopla reveals.

The platform says that the worst of the house price falls ‘is over’ and buyer demand is continuing to recover.

Also, the supply of homes for sale has risen by 66% – that’s above the five-year average at Easter.

But, the data shows, the income needed to buy a three-bed home for a first time buyer has rocketed since 202 by an average of £7,350 to a total of £55,900

Three bed homes remain the most in demand property for first time buyers, but higher mortgage rates mean a clear shift toward two bed homes.

‘Steep rental market’ has led renters to buy

Zoopla says that a ‘steep rental market’ has led to first time buyers becoming the largest buyer group last year – and this cohort is expected to remain a strong source of sales this year.

Richard Donnell, the firm’s director of Research and Insight, said: “Housing market conditions continue to improve as buyers return to the market and more sales are agreed.

“House prices are posting very modest falls and are expected to be just 1% lower by the end of the year.”

He added: “The worst of the pricing adjustment appears to be behind us.

“We expect first time buyers to have another strong year in 2023 having been the largest buyer group last year.

“They need more income to buy but are starting to look for smaller homes and get away from rapid growth in rents.”

‘Worst of the price falls are behind us’

Sarah Coles, the head of personal finance at Hargreaves Lansdown, said: “The property market could be emerging from the bargain basement: Zoopla is predicting that the worst of the price falls are behind us.

“First time buyers are helping to prop the market up, and with house prices rising more slowly than wages, they could remain key to the health of the market for the rest of this year too.”

She adds: “A healthy dose of realism is also easing the sales process.

“Sellers are being more pragmatic about pricing from the outset, with just under a quarter needing to cut the price after coming to the market with too much optimism.”

‘Prospective homebuyers need to make sacrifices’

Iwona Hovenko, a real estate analyst at Bloomberg Intelligence, said: “Lenders’ tougher affordability checks, combined with the still-elevated house prices, mean that prospective homebuyers need to make sacrifices to buy their first home.

“This is especially true as the tough rental market is further forcing the hand of house hunters, given the fast-rising rents and the relative insecurity of this tenure.

She added: “Bloomberg Intelligence’s previous housing survey pointed to the desire to ‘stop renting’ as the strongest motive to buy a house among first time buyers (59%), especially in London (64%).”

‘Many house hunters used the Easter holidays’

Matt Thompson, the head of sales at Chestertons, said: “In an attempt to beat the competition, many house hunters used the Easter holidays to continue their property search and arrange a viewing for early May.

“Due to London’s chronic undersupply of properties, the market remains challenging with some properties attracting several offers from interested buyers.

“Whilst strong demand is allowing the majority of sellers to secure their asking price, buyers are often left having to compromise.

“This is particularly the case for first-time buyers or house hunters with smaller budgets.”

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northern landlord

13:09 PM, 3rd May 2023, About 12 months ago

Can’t agree with this. Surveys have shown that the main reason renters are dissatisfied is that they have to rent because they can’t afford to buy. If they had the wherewithal they would most likely buy. The biggest barrier to buying a home for many renters is getting a deposit together, so increasing rents make this more difficult. How do we know that the increased number of first time buyers are ex renters? Maybe put off by high rents they are the ones that stayed at home with parents and managed to save a deposit while doing so. Plus of course mortgage repayments have risen in excess of rent rises (this is why some BTL landlords are having to call it a day). Any renter becoming an owner has to also factor in the costs of actually owning a home. No more free building insurance and you will have to arrange and pay for any repairs yourself.

Judith Wordsworth

20:59 PM, 3rd May 2023, About 12 months ago

If rent per month = monthly mortgage payment then it's not rocket science people, who can afford the deposit, are going to buy instead of renting.

Don't agree we've seen the last of property prices dropping. I think 2027 will see property prices start falling and continue falling throughout the year if EPC A-C become mandatory for rental properties.

It used to seem to be an 11 year cycle but obviously other factors have come to play in the last 3 years.

I think 2032 will be another year seeing property prices dropping, probably quite considerably, as owner occupied properties will need to be EPC A-C.


4:47 AM, 6th May 2023, About 12 months ago

It is not uncommon for rising rents to make it more difficult for tenants to afford their housing costs, and in some cases, this may lead them to consider purchasing a home for the first time. This can be a significant financial decision, and there are many factors that should be taken into account before making a purchase.

One advantage of becoming a homeowner is that it can provide greater stability and control over housing costs. Instead of facing the uncertainty of rising rents, homeowners have a fixed mortgage payment that remains the same over the life of the loan. In addition, homeownership can offer other benefits, such as the ability to build equity and the potential for appreciation in the value of the property.

However, there are also potential downsides to homeownership, such as the cost of maintenance and repairs, property taxes, and the risk of declines in property values. In addition, purchasing a home requires a significant upfront investment, and the ongoing costs associated with homeownership can be substantial.

Before making the decision to become a first-time homebuyer, it is important to carefully consider the financial and lifestyle implications of homeownership. This may include consulting with a financial advisor or other professional who can help you to understand the costs and benefits of homeownership, as well as the options available for financing a home purchase.

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