For a first-time buyer, the prospect of owning a home is exciting as well as a bit daunting. This has been more so during the pandemic when existing facilities were suddenly withdrawn with the lockdowns etc.
However, many prospective buyers have not given up on the idea of purchasing their first home – they have just put the idea “in lockdown” for the time being – but are definitely planning to buy in the future. This can be confirmed by those involved in the property market, including the Buckingham estate agents.
A few reasons for this delay in purchase are given below.
Finance and job security: The effects of the pandemic hit everybody. While some people continue to work online from home, many were put on furlough to reduce wages. Some even lost their jobs. This financial insecurity caused many prospective first-time buyers to rethink and decide to keep their dream home still a vision, with the hope of fulfilment later on.
Before the pandemic, parents were able to help their children with deposit money. However, with more redundancies among the older people and their finances hit during the Covid catastrophe, such assistance had to be curtailed – another reason for first-time buyers, among the younger generation.
Especially, putting off the purchase of a property. Employment opportunities have dwindled, with even basic jobs requiring a minimum college education. To earn their degree, many young people are already in debt with education loans.
SDLT holiday: This has been of great benefit to many prospective buyers, with the holiday extended till the end of June with a tapering process until September 2021. However, for first-time buyers, the benefits do not really apply since, in any case, they are free from the stamp duty land tax.
For first homes for up to GBP 300,000, no SDLT is applicable. For prices up to GBP 500,000, a 5% SDLT is payable on the amount exceeding GBP 300,000. Hence, not many first-time buyers have rushed to take advantage of this time frame. Some are looking forward to the end of the SDLT holiday.
Mortgages: During the early days of the pandemic, many good mortgage schemes with minimal deposits were withdrawn, making it difficult for first-time buyers to put down a larger deposit.
This was another reason for such buyers to put purchases on hold. Now, the Government’s 95% guarantee scheme, with just a 5% deposit payable, has made it easier for prospective buyers.
This has led to other competitive mortgage schemes coming on the market. However, buyers should check these offers thoroughly as the interest rates can be high. Some of the lowest deals have expensive fees.
Price rise: The lockdowns caused many people to prioritize comfortable accommodation while working online, from home. This has led to quite an exodus from city centres to larger, more spacious accommodation in suburban, rural and coastal areas.
With the demand for such accommodation rising, there has been a hike in prices, making it even more difficult for first-time buyers to afford the type of accommodation they want.
Another reason for the delay in purchasing property is that first-time buyers are still unsure of the future and their working policy, so they have delayed purchasing until they are more certain.
High living costs and rent: During the pandemic, rentals have been rising, and prospective first-time buyers are still paying a large portion of their income towards rent. Coupled with the high cost of living and low income, it does not leave much for savings.
Supply against Demand: The property market finds it difficult to cope with the demand against the limited supply. This has caused a hike in house prices, making the first-time buy less affordable.
Conclusion: Many prospective buyers have put their plans on hold for the time being due to the reasons mentioned above. However, they are still keen to purchase their first homes. And there are some silver linings to the grey clouds.
Some government schemes are of benefit to first-time buyers, including the Lifetime ISA (tax-free saving scheme), 95% mortgage guarantee scheme, and Starter home scheme (offering equity loans of up to 20% of the value of the home – and up to 40% in London – with a five-year interest-free period).
Also, some elderly people with larger homes are finding it difficult to sell even though they are keen to; others need to sell quickly for various reasons. They have reduced prices which makes it worth looking into for new buyers.
Last but not least, the prospective buyer’s budget, credit rating, anticipated fees and legal expenses will have to be carefully considered. An experienced real estate agent will afford information and guidance on all the above issues, helping a first-time buyer to decide whether or not to put a purchase on hold.
Read also: How to Choose the Right Property Manager
