First-Time Buyers Choose Location Over Space

Millennials have been dubbed as the Generation Rent, but recent data show lockdown has driven the younger generation to buy their first property where they can thrive while work-at-home orders are in place.

Unlike families in London who are dispersing into the suburbs for bigger space, Millennials are purchasing property within the capital, preferring location over space. According to Hamptons International, the number of inner London homes (Zones 1-3) sold to first-time buyers rose by seven per cent to 35 per cent from 28 per cent pre-lockdown. In contrast, the number of homes sold in outer London (Zones 4-6) fell by five per cent to 31 per cent from the previous 36 per cent sales.

According to the latest data, the average age of first-time buyers in the UK is 34 years old which is 6 years older than the average age back in 2007. Stricter mortgage lending rules, high cost of entry, and unemployment rates are just some of the factors attributed to the decrease in homeownership among the younger demographic. However, some Millennials are taking advantage of the stamp duty holiday, lower interest rates, and a new Help to Buy scheme to secure their first property during the pandemic.

In an interview with Homes and Property, analyst David Fell of Hamptons said, “There has undoubtedly been a shift in buyer preferences over the last five months towards having space both inside and out. But this shift has been less pronounced among first-time buyers. They put their location and surrounding activities over household space.” 

“So, while some second and third steppers have increasingly chosen outer London over inner, first-time buyers have not been swayed in the same way,” he adds.

This preference for location over space can be partly explained by the fact that most first-time buyers are either single, don’t have kids or does not have a big family. Their priority is less about raising a family and more about being at the centre of the action. In this case, opportunities are still found in the capital city of London.

On the other hand, families leaving the capital for the idyllic suburbs likely already have a stable job and require less hustle for personal and professional development.

First-time buyers are taking part in the current property market mini-boom to save as much as ￡15,000 from the Stamp Duty holiday, but others are more apprehensive. Amid talks about the bubble bursting, experts remain cautiously optimistic. Both Knight Frank and Savills forecast growth in London prices by 2024, at 15 per cent and 12.7 per cent respectively.

For buyers waiting for the boom to die down, there is a chance that the slowdown in transactions next year could lead to higher loan-to-value mortgages and low-interest rates.

As for location, Millennials may be on to something. The forecast for property prices in London is positive as the capital has always outperformed the rest of the regions, historically speaking. With a vaccine underway, the transition to a post-lockdown world is on the horizon and London remains a bright spot for employment opportunities and excellent infrastructure for mobility. Several mega projects are also going to transform London to generate more interest just in time for a post-lockdown world, including the proposed multi-billion pound theme park and resort in Swanscombe, Kent.

It is understandable for some first-time buyers to hold off with their purchase, especially with the current month-long lockdown. But the pandemic is not here to stay, so first-time buyers with a ready deposit and secure job prospects can look forward to transitioning from being tenants to homeowners. Not all your life plans have to be put on hold.