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First-time buyers are becoming less influential in the housing market, said property portal Zoopla this week.
The ability of this group to purchase property is starting to be impacted by the Coronavirus recession and reduced availability of higher loan to value mortgages, said Zoopla. And its presence in the market is being overshadowed by existing homeowners who, after the Coronavirus lockdown, have decided to move house.
‘Weaker demand amongst first time buyers correlates directly with when lenders started to withdraw high loan-to-value mortgage products in early June’, said Zoopla.
Unlike first time buyers, existing homeowners, many of whom have made once-in-a-lifetime re-valuations of where they wish to live are driving demand that ‘shows no sign of weakening’.
And, said Zoopla, a large portion of existing home owners have either no mortgage or smaller loans, meaning affordability is less of a barrier to movement. ‘This is especially true for households looking to trade out of cities to more rural areas with lower values and better value for money’.
But although the strength of demand has seen new sales agreed outperforming the same period in 2019, it is unlikely that 2020 will recover the sales lost to the market in the lockdown. This is due to the three to four month lag time between sales agreed and legal completions. ‘Ultimately, we expect sales to run 15 per cent below 2019 levels by the year end’, said Zoopla.
‘With demand currently tracking at 39 per cent above last year, the first quarter of 2021 is expected to deliver a windfall for the market, as sales agreed reach completion, and mortgage lenders and conveyancers make headway with the unprecedented backlog of applications’.
‘Housing market conditions remain strong as new restrictions are introduced to control the spread of COVID’, commented Zoopla research and insight director Richard Donnell. ‘These changes are likely to continue to support housing demand in the near term as the importance of the home grows. However, the housing market will not remain immune to the impacts of weaker economic growth and rising unemployment.
‘A change in the mix of buyers is supporting market conditions with sustained demand from equity-rich existing owners seeking more space and a change in location. In contrast, first time buyer demand is weakening. FTBs have been a driving force of housing sales over the last decade. They remain a key buyer group but lower availability of higher loan to value mortgages and increased movement by existing home-owners means a shift in the mix of home buyers into 2021’.