The outlook for first-time buyers in the UK housing market

Amidst the ebb and flow of economic landscapes, one question looms large for prospective homeowners: will more first-time buyers venture into the UK housing market this year?

The impact of inflation and economic factors

As we navigate the aftermath of recent inflation highs, it’s evident that consumer spending power has been affected. Despite a gradual decline in inflation, the lingering impact continues to shape the housing market dynamics. The surge in activity witnessed in 2021 and 2022, fuelled by the race for space amidst the COVID-19 pandemic and stamp duty cuts, is unlikely to be replicated. The squeeze on available cash and prevailing uncertainties are expected to moderate the price expectations of potential homebuyers, resulting in a more subdued housing market in 2024.

Adjusting expectations

In light of evolving market conditions, prospective first-time buyers are recalibrating their expectations. Halifax has reported that a significant proportion, approximately 61%, are now open to relocating to different regions in pursuit of homeownership. Moreover, 46% are willing to consider properties smaller than their ideal size. As house prices potentially dip and wages outpace inflation, affordability may see an uptick, offering a glimmer of hope for aspiring homeowners.   That said, it’s been reported first time buyers now need a large deposit to get on the property ladder.

The election factor

The impending 2024 General Election adds another layer of complexity to the housing market narrative. Both government and opposition parties have underscored their commitment to enhancing access to homeownership, making housing a pivotal battleground. However, the ever-evolving political landscape may introduce a degree of uncertainty in the market leading up to the election.

Alternative avenues: shared ownership

Against this backdrop, shared ownership properties emerge as a viable pathway for individuals grappling with affordability challenges. The projected increase in demand for shared ownership homes signifies a growing trend among prospective homeowners seeking alternative routes onto the property ladder. Nevertheless, it’s imperative to note that increased demand doesn’t necessarily translate into heightened supply, posing potential challenges in the market.

According to Capital Economics, the decline in mortgage rates since last summer is expected to pave the way for more first-time buyers to enter the market. This anticipated influx, coupled with tight supply dynamics, is projected to fuel a 3% increase in prices this year. With house prices already experiencing a notable rise in January, the forecast appears well on its way to fruition.

Bridging options

Bridging finance is being used more frequently by first-time buyers. These short-term loans can be utilised by the ‘bank of mum and dad’ in order to quickly release equity to be used by their child as a deposit for their first property.

In conclusion, the outlook for first-time buyers in the UK housing market in 2024 is a blend of cautious optimism and strategic adaptation. While economic factors and political uncertainties cast shadows of doubt, opportunities for homeownership persist, albeit amidst evolving market dynamics. Aspiring homeowners must navigate these complexities with prudence, leveraging insights and projections to make informed decisions in their quest for homeownership.

As the housing market continues to evolve, the journey of first-time buyers unfolds against a backdrop of economic shifts, political manoeuvres, and shifting consumer sentiments. Amidst these fluctuations, one thing remains certain – the aspiration for homeownership perseveres, driving individuals to explore new avenues and opportunities in pursuit of their dreams