First-time buyers are struggling to afford new properties

Persimmon, one of the UK’s largest house builders, has said in a statement to investors that first-time buyers (FTBs) are struggling to buy first homes in current economic conditions.

According to reporting in The Guardian, ‘The company, which is one of the UK’s largest domestic property developers, said people looking to get on the housing ladder were facing “stretched affordability” and less choice on home loans.

Rising mortgage rates have led to higher loan-to-value ratios for first-time buyers, “particularly in regions with higher house prices”

It’s unlikely to come as much of a surprise to many involved in the market that the winding down of government support, rising interest rates, and reducing options in the mortgage market has meant less entering at the bottom level.

The question raised is how does this affect the private rental market and the buy-to-let market?

The market is changing continuously in reaction to wider events, however, many fundamentals remain consistent and so we can take a look at what a lack of FTBs may mean to secondary markets within UK property and buy-to-let.

How first-time buyers affect the property market

If there is a lack of first-time buyers in the housing market, this could lead to increased demand for rental properties, making for a lucrative market for UK buy-to-let.

A limited supply of rental properties could mean fewer first-time buyers entering the housing market and subsequently there may be less demand for properties to buy, which could lead to fewer properties being built or converted for sale. This could limit the supply of housing stock, and as a result, first-time buyers who are unable to enter the market may instead opt to rent.

This trend could then lead to increased demand for rental properties, as those who would otherwise have bought property are now competing for the same rental properties. As the demand for rental properties increases, landlords may increase rents to meet the demand.

In addition to this, if there is a shortage of affordable homes for first-time buyers, they may need to rent for a longer period than they would have otherwise. This would only add to the increased competition for rental properties, as those who would have left the rental market after purchasing a home continue to compete for the same properties – resulting in a lower chance of void periods in rental properties.

Is now a good time to invest in UK buy-to-let?

It will depend on your financial circumstances but UK property has been one of the most reliable and profitable investments over the past 5, 10 or 20 years in comparison to other assets.

With a consistent and steady rise in prices as well as a passive income that is increasing in line with inflation, buy-to-let property remains a really attractive prospect to most investors.

Importantly, it’s key to ensure that you get good advice and it’s why we always have experts on hand to talk our clients through important investment decisions. If you’re looking to invest in UK property then why not get in touch with us today?