Soaring house prices, stamp duty changes and large deposits are pushing first-time buyers in London to search for cheaper homes than previously, new analysis from Zoopla shows.
Whereas first-time buyers across the country tend to look for homes valued at 15 per cent below the average house price in their area, those in the capital are searching for properties which are 21 per cent cheaper.
Londoners, meanwhile, have been looking at buying homes which are 2.4 per cent more affordable than a year ago.
This comes in stark contrast to the rest of the country, where first-time buyers are searching for more expensive homes, thanks to improved mortgage availability which has boosted borrowing power by 20 per cent.
Typical first-time buyers across the UK are looking for homes that are 2.4 per cent more expensive than last year. But in more affordable areas, like the North East, this is even greater, at 10.2 per cent.
In part, this is because property prices in London are considerably higher than other parts of the country.
The average first-time buyer home costs £420,600 in London, compared to £229,000 across the UK. In London, this is 21 per cent less than the average cost of all property types, at £534,038.
Changes to stamp duty have also had an impact on affordability. Since April, first-time buyers in parts of the capital are paying almost £12,000 more than previously, after Chancellor Rachel Reeves lowered the threshold for stamp duty from £425,000 to £300,000 for this group. Rumoured changes to stamp duty could disadvantage London buyers further, argue property experts.
Higher house prices and affordability pressures are also pushing first-time buyers in the capital into smaller homes. Whereas first-time buyers in other parts of the country tend to look at three-bedroom houses, Londoners primarily target one and two-bedroom flats, says Zoopla.
First-time buyers are a significant part of the property market, accounting for 39 per cent of all sales each year, and almost half (49 per cent) of all new mortgages for property purchases.
Outside of London, therefore, the group’s search for more expensive homes means that house price growth for this section of the market is outpacing the average. Over the last year, for example, the average price for a first-time buyer home grew by 2.4 per cent, compared to the UK average of 1.3 per cent across the market.
But in London, the pressures of affordability are causing house prices at this section of the market to slump.
“First-time buyers have had a 20 per cent boost to affordability over the last six months. This is enabling them to look at buying higher value homes in the more affordable parts of the country which is supporting faster house price growth across the board,” explains Richard Donnell, Zoopla’s executive director.
“In contrast, first-time buyers in London and southern England are looking for cheaper homes than a year ago despite the extra borrowing capacity. The ending of stamp duty reliefs since April has added to the cost of buying a home for first time buyers.
“Large deposits and mortgage regulations mean a high household income is needed to buy in southern England where affordability remains a challenge, and this is acting as a drag on house price growth across southern England.”
