Compromise key when you are a first time buyer

Posted on Saturday, August 12, 2017

Post Office Money surveyed more than 1000 people who made their property ownership goals a reality in the last 24 months and found that compromise was the key to realising their dreams.

According to the findings, 70% chose to buy a home an average of 26 minutes from their original ‘preferred’ location.

While 16% didn’t have to adjust their expectations at all, other successful FTBs ended up being flexible towards having a suitable garden (5%) or availability of car parking spaces (3%). Surprisingly few had to take on a property that needed some structural work (4%).

Owen Woodley, Managing Director, Post Office Money comments: “With average house price growth having increased by 48% since 2005, compared with an increase to the average FTB income of only 37% over the same period, there is no question that the UK housing market remains a challenging environment for many. In spite of this we’re seeing that first time buyers approach the market with enthusiasm and flexibility.

Our data also shows that almost two-thirds (62%) of home sales are still in areas across the country that remain within reach for those looking to take their first steps on the property ladder and FTBs can really benefit from thinking outside the box to realise their property aspirations. We’ve worked with the team at Proportunity to develop our ‘Hidden Gems Guide’ with this in mind.”

First-time buyer motivations

The drive to buy is alive and well with the biggest emotional drivers cited for deciding to buy a house being:

• having met a partner and wanting to make a home together (24%)

• wanting the security of a long-term place to live (21%)

• wanting to move out of a parent’s/family’s property (16%)

• feeling it was expected that they should own a home (15%)

Financial considerations also ranked highly with 25% of respondents deciding to buy as they felt they were spending too much on rent and it wasn’t a good investment and 23% feeling ready as they had enough savings to put against a deposit. 18% saw investing in property as the best investment of their money long term.

The first-time buyer experience

44% said the experience of being a FTB was exciting or joyful, many also found it to be stressful (24%), frustrating (12%), daunting (9%) and exhausting (4%).

Encouragingly, 83 % of respondents said they were approved for their mortgage first time around, although many cannot do it alone. Half (51%) received financial support from friends or family, with 44% asking for this help.

The top 3 pain points of the FTB experience were shown to be:

• The uncertainty, anxiety / stress once in the process of securing an actual property (28%)

• The extra costs that were incurred but not anticipated e.g. solicitor’s fees (24%)

• Having to borrow money from loved ones (15%)

When it comes to passing on their tips to other prospective buyers, the advice recent FTBs most want to share is:

1. See lots of properties in your price range (32%)

2. Think long-term (31%)

3. Be flexible on the type of property you will purchase (29%)

4. Be flexible on the location you will buy in (27%)

5. Use your imagination to see the full potential of a place (25%)

6. Start with areas which are affordable to you (25%)

Affordability overview

Affordability peaks in Southampton, where the average property price is £199,074 and 98% of properties are in areas deemed affordable to the group. Norwich and Nottingham were also among the UK’s ‘affordable hotspots’, with 93% and 89% of properties in areas affordable to first-time buyers, respectively.

In the last year, Bristol has seen the biggest shift in affordability for FTBs, with the number of properties affordable for this group shrinking by 20%, leaving 29% of homes in the city fitting within the average FTB’s budget. For those lucky enough to make a savvy investment a year ago, average property prices in the area have also increased by 14% to £268,070.

And while many may assume that London would be least affordable to first-time buyers, in fact Brighton takes this dubious title, with average property prices being £352,303 and only 2% of properties are in areas considered affordable to first time buyers in the region (compared to just 5 years ago when 25% were affordable).

Help to spot the potential ‘hidden gems’ of tomorrow

Post Office Money partnered with Proportunity, an innovative technology start-up that builds real estate forecasts through the use of artificial intelligence, to create a simple step by step guide that FTBs can use to help identify the potential property hot-spots of tomorrow.

Vadim Toader, CEO of Proportunity commented: “If you’re a first time buyer, you’ll likely have to buy at the cheaper end of the property market. However by understanding how to identify the potential property hotspots of tomorrow, your first property could get you on track to buying the home of your dreams before too long.”

If you’re looking for a fast growing area and hoping to make a good financial investment, it may be helpful to consider the following factors to help maximise your chances of choosing the right property:

Step 1:  Identify the more affordable areas of the city/ region you want to move to, by looking where property prices are much lower than the city/region’s average

Step 2:  Avoid areas that have experienced particularly high growth in recent years, as that suggests potential for future growth has been already exhausted and prices will not grow much going forward

Step 3:  Identify if there are any urban transformation projects / infrastructural developments planned that could impact the area. These are usually announced at least 2 years before they get underway and signal an upcoming regeneration of the area and, therefore, a potential increase in prices

Step 4:  Investigate the crime rates in the area to understand the severity of the crime and whether the picture is improving or worsening. There is usually a delay between when an area becomes safe and when the general public becomes aware and trusting of this. If you can spot this ahead of the market and buy when it is affordable, you may find a future gem   

Step 5:  Explore if there are any developments planned for schools in the local areas. Improvement in education offering in affordable areas tends to push prices up.

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