The UK property market has been through a period of disruption over the past 12 months. House prices are rising more slowly compared to the record highs during the pandemic, but mortgage rates have increased, affecting affordability.
First-time buyers especially face significant barriers to buying – they lack the benefit of equity, and mortgage lenders view them with caution. But, nonetheless, first-time buyers remain a dominant force in the housing market, thanks in part to first-time buyer schemes and benefits available. Let’s take a closer look at why first-time buyers are so active and influential.
1. First-time buyer schemes
Many first-time buyers can take advantage of schemes such as the government’s First Homes scheme. This allows some first-time buyers to buy a home for 30-50% less than its market value, as long as they meet certain criteria.
The home being bought under the scheme must be a new home, or one being sold by someone who bought it under the same scheme. It must cost no more than £250,000 or £420,000 in London, once the discount has been applied.
This helps ensure the scheme benefits those who would not otherwise be able to get on the housing ladder, rather than simply boosting those already in a position to buy their first home. This results in more first-time buyers entering the housing market.
Other schemes aimed at helping first-time buyers include the Lifetime ISA – where buyers save up to £4,000 a year, and the government tops it up by 25% – and shared ownership.
2. First-time buyer stamp duty benefits
First-time buyers usually pay much less stamp duty than existing homeowners, which is helping them continue to be a dominant force in the market by removing one of the biggest barriers to entry.
Stampy duty is a tax paid by the buyer, with the amount depending on the cost of the property. But under the stamp duty relief scheme, a first-time buyer won’t pay any stamp duty at all if the purchase price of the home they’re buying is £425,000 or less. If it is between £425,001 and £625,000 they will pay 5% on the portion of the price that is above £425,000.
Only if the home costs more than £625,000 – far higher than the average Hampshire house price of £419,007 – will a first-time buyer be ineligible to claim stamp duty relief.
3. Desire to buy
The stability provided by owning a home remains as desirable a goal as ever. So, despite affordability challenges, first-time buyers are doing everything they can to get onto the ladder.
This might be lifestyle changes to aid saving, such as moving in with parents or living in a house share, or strategic career decisions that help with getting a mortgage.
First-time buyers are also looking further afield to try to get more for their money. Many are shifting their focus away from London and towards more affordable areas that benefit from excellent transport connections, such as Andover and Whitchurch.
Ultimately, first-time buyers are willing to do what it takes to get on the property ladder. This desire to buy, aided by first-time buyer benefits and schemes, means this sector of the market continues to thrive.
If you’re hoping to buy your first home in Hampshire, or you’re thinking of selling, contact Graham & Co today.