Recent reports shows that, for the first time in about twelve years, first time home buyers are making up about half of all of the home buyers out there. In other words, approximately half of all homes that were bought last year in 2018 were purchased by people who had never bought a home before. This is a first for the UK housing market in over ten years, since 2006 to be exact.
This just goes to show a massive change in the status quo, in the economy, and in the housing market industry. It may be due to more money in the bank of Mom and Dad piggy, or might be due to an increase in government help to first-time buyers. But regardless, the statistics are here before us, and it is an interesting turn of events to observe.
What does this mean, the highest level of first time home buyers in 12 years
It seems that, all of a sudden, the number of first time home buyers has sky rocketed. This is an astounding feat considering the massive responsibility, both financially, and industrially, of owning a home. The most expensive investment to make has suddenly seen an enormous shift in demographics. Whereas the majority of home buyers has usually been by those who have already had home buying experience, now, first time in over a decade, first time home buyers are making a comeback. How are they doing it, especially with the subtracted capital that a regular home buyer would have (as in, no old house to sell for a down payment). In addition, does this mean that the housing market industry is shifting in a completely new direction, or maybe going back closer to one similar to the trends we saw in the 1990s, especially way before the recession years? Are first time home buyers anticipating a better future in the home buyers world, or are there just better and more improved opportunities and resources for first time home buyers than ever before?
There is much to consider when looking at such a big turn of events, especially if you are interested in becoming a first time home buyer, or know somebody who is. Regardless, the world is changing and with new trends emerging, new and unimaginable opportunities are always coming about.
This short article reviews some data, as well as references some professionals in the economic and home owner fields, for increased insight on the first time home buyers market in order to answer some of the questions that we posed above. Read on for more information on this interesting reality that unfolded just last year, in 2018.
What does the research tell us?
Research has always been the most reliable aspect of crunching the numbers. And there are a lot of numbers to throw around.
But first, according to the Yorkshire Building Society, there were 367,038 first time home buyers who used mortgages in 2018. To put this number in perspective, the Yorkshire Building Society also found that this figure is nearly double the numbers from 2008. In 2008, there were just 193,300 first time home buyers who held a mortgage. The 2018 figure also stands just 9 per cent lower than the pre crisis peak, which happened over a decade ago, back in 2006. During that year, there were 402,800 first-time home buyers who also had a mortgage. And, once again according to the Yorkshire Building Society, first time home buyers and owners now make up fifty per cent of all of the homes bought with a mortgage. This is the highest ratio in over twenty years, since the year 1995 to be exact.
Where do these numbers come from?
These numbers come from January to October of 2018. The last two months (November and December) were estimated and projected, based off of the previous trends and buying patterns. The findings are based off of the data of market wide first time buyers from the trade association in UK Finance. But, the market has also slowed down considerably. In just one year, from 2017 to 2018, the numbers have decreased by seven per cent. In 2017, for instance, the growth of first time home buyers was eight per cent, whereas in 2018, the growth of first time home buyers was only one per cent. This could be a sure sign that the stimulating factors behind this incredible growth has reached its peak and is starting to stall out. Though, we do not have the data from years leading up to 2017 and 2018 to compare. With the start of 2019 at our heels, we will have to wait and see what 2019 brings to the aspiring first time home buyer’s front door.
How are first time home buyers able to afford houses like they never were before?
With data like this astounding, it is hard to not question and wonder how in the world first time home buyers are able to afford it, and comfortably afford it, for that matter. For starters, the prices in housing costs have increased at a faster rate than wages and inflation, which logically should be making it more difficult to become a first time home owner, or regular home owner for that matter. But, there are been several factors that have helped to make such a reality possible.
For instance, it is said that several initiatives led by the government have helped to fuel such a change. Two such initiatives include the Help to Buy Isas, and also the stamp duty relief. Both have been found to be correlated with the increase in first time home buyers. In addition, the Yorkshire Building Society expert economist, Nitesh Patel, explains that, “over the past three or four years, we’ve also seen more mortgage lenders offering 95 per cent loan-to-value mortgages, as well as strong competition driving mortgage rates down.”
In addition, due to the higher stamp duty and lower tax relief, buying a property becomes a less profitable occurrence and investment. This helps to relieve upward pressure on prices. As a result, buy to let landlords are on the losing end of the tug of war rope, and the first time home buyers are winning.
Finally, the bank of Mom and Dad might play a bigger role than most think. With jobs being on the low end after university, and the incredibly competitive environment, buying a house has become an increasingly difficult feat. Nonetheless, parents enjoy being empty nesters. As a result, the aid from previous generations, as well as the experience that parents and older generations have on responsibly buying a home, have probably helped to make it a bit more of a successful environment and endeavour for first time home buyers who might otherwise not have been able to afford their first home on their own.
As a result of multiple factors, the housing market industry has drastically changed. Nitesh Patel of the Yorkshire Building Society adds that, “buying your first home remains tough for many but it’s encouraging to see first-time buyer levels at a 12-year high and climbing.” And he also says that, “despite these challenges, the first-time buyer market has bounced back following the financial crisis to outperform other sectors, such as the home-moving and buy-to-let markets.” This is a pretty big deal, and one to consider from all angles.
For instance, you might now be asking yourself some if the following questions. Is home ownership going to continue to soar, even past the current status quo of rented homes and apartments? Are people still building homes, or is buying becoming the optimal option? How old are these first time home owners and buyers, and, are they buying for themselves or for a family? Does this also mean that people are getting more serious about staying put in one area, as compared with the more short term and added flexibility of a leased apartment? The questions are endless, and with limited research conducted due to the brisk way in which this unfolded, there is still more to be found out.
If you are considering buying a home, and you qualify as a first time home buyer, then maybe the time is finally right for you to take that big leap of faith. After all, you would not be alone. With trends as they currently are, the time seems to be ripe to purchase a first home. Though with the sudden 7 per cent decrease in growth from 2017 to 2018, it will be interesting to see what all unfolds in this upcoming year.