Pandemic makes homeownership harder for many first-time buyers

Young couple looking around an empty property

Taking your first step on the property ladder is one of life's major milestones, but for many people it's a goal that has become harder to reach over the past year.

A new study by Santander reveals that the impact of the pandemic -- both on the property market and the personal finances of those looking to buy -- has exacerbated the existing gulf between struggling first-time buyers and those already on the property ladder.

The high street lender surveyed 12,000 UK adults for its report 'Life after lockdown: the future of UK homeownership'.

The report showed that the homeownership dream remains strong, with nearly two-thirds (63%) of first-time buyers saying it is even more important than it was before the pandemic.

However, more than four in ten first-time buyers (44%) delayed their plans to buy a home in 2020 in the face of challenges including raising a deposit, falling income, family financial pressures and house price rises across the country.

Although the pandemic has enabled many households to accumulate more savings due to reduced spending opportunities, less than one in five (17%) first-time buyers said that lockdown had enabled them to save more money for a deposit, compared with 31% of all buyer types.

This inequality stems from the fact that younger buyers were more likely to be affected by furlough, unemployment and reduced income, while also paying rent.

At the same time, over half (54%) believe that financial support for first-time buyers from their parents -- often referred to as the 'Bank of Mum and Dad' -- will be less available post-pandemic. ONS figures show that redundancies among the over-50s almost tripled over the last 12 months, contributing to financial pressures for parents who might previously have been able to support their children in raising a deposit. Separate research from Santander suggests that on average, the Bank of Mum and Dad provides more than £18,000 of financial support to a first-time buyer.

Over half (52%) of first-time buyers now say that raising a deposit is the biggest issue they face, up from 30% who identified this as the key barrier in Santander's 2019 first-time buyer study.

The pandemic has also impacted the property market, with growing numbers of people looking to move away from inner cities in favour of rural and coastal living. Last year, house prices grew almost twice as fast in Wales (11.0%) and the North-West of England (10.5%) as they did in London (5.7%).

As a result, first-time buyers may find themselves priced out of a growing number of areas, with 33% saying that finding an affordable property in their preferred area is a barrier to ownership -- three times the 11% who cited this as a barrier in 2019.

To help improve first-time buyers' prospects, Santander is calling for:

  • a government loan scheme that enables public sector key workers to borrow money towards a deposit;
  • stamp duty thresholds to be matched to regional average house prices and a stamp duty incentive for over 55s looking to downsize;
  • a review of the loan to income rules on borrowing, allowing greater flexibility to consider previous customer spending behaviours, such as rental payments; and
  • a commitment that commercial to residential conversion plans will include development of essential local amenities, ensuring a property holds its resale value.

Posted by Fidelius on July 5th 2021

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