First-Time Buyers Face Struggle To Get On Ladder

Posted 23rd August 2023 by ctatax-admin

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.

Read the article on Forbes Advisor

22 August: First-Time Buyers Face Struggle To Get On Ladder

Renting is cheaper than buying a home, on average, for the first time since 2010, according to data from online property portal Zoopla, writes Jo Thornhill.

Typical monthly rent is now £122 cheaper than buying an average-priced property as a first-time buyer. The change is down to higher mortgage rates pushing average home loan repayments up.

But while rents are now cheaper on average across the UK than first-time buyer mortgage payments, renting is still more expensive in six regions, including Scotland, the North East, Northern Ireland, Wales, Yorkshire and Humberside, where average properties to buy tend to be cheaper.

In London, the average first-time buyer home costs £522,000, according to Zoopla. If buyers have a 15% deposit of around £78,000 it would mean a monthly mortgage repayment of £2,546 (this is assuming a mortgage rate of 6% over a 30 year term). But to rent the equivalent property would cost £2,053, a difference of almost £500.

In contrast in Scotland, where average first-time buyer homes are £127,000 and the average mortgage payment is £620 per month, rents are at £748 for the same property, making renting more costly.

Historically, renting has been cheaper than buying, but as rental demand has increased, competition for good quality rental homes has pushed rents up. It has meant that average rent has been more expensive than buying a similar property for over a decade in most parts of the country.

Izabella Lubowiecka, senior property researcher at Zoopla, says: “It’s a tough housing market for first-time buyers, with high mortgage rates pushing up costs for those attempting to step onto the ladder. In fact, our research found that nationally, it’s now cheaper to rent a home than buy one for the first time since 2010.

“But the picture varies enormously across the country. In large parts of the North and across Scotland and Wales, it’s still more cost-effective to stump up for monthly mortgage repayments than rent.

“We’re seeing first-time buyers get more creative with their home move – considering alternative areas to start their search, looking for more modest properties or buying with friends or family.

“We also predict house prices will fall around 5% over the course of 2023, and mortgage rates may have already peaked, which might be the nudge many first-time buyers need to move ahead with their purchase.”

Soaring mortgage rates are causing more people to downsize and move back to cities, a reverse of the trend seen during the Covid-19 pandemic when there was an exodus away from urban areas.

A survey of more than 2,000 people by property tax experts Cornerstone Tax has found that one in 10 people (six million) intend to move closer to a city in the next five years due to benefits of the proximity to amenities, such as schools, transport links and shops.

A further 11% of workers report they’ve already had to move away from a rural area because they could not afford the cost of living and commuting to work. Many have downsized and are now renting property closer to a city.

Younger workers are leading this march, with more than one in five aged 18 to 24 saying they’ve moved from a rural area to a city since the pandemic.

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.