Yahoo Finance First-time buyers are losing interest in the city
City living is losing its appeal among first-time buyers in the UK, research suggests.
The city has long been a destination for first-time buyers, but the majority now prefer quieter locations, according to research by online mortgage broker Trussle.
Despite the allure of wider career prospects and higher salaries in major cities, nearly three quarters (71%) of first-time buyers are now planning to buy in towns, suburbs and rural locations, the survey of 2,000 Brits found.
In contrast, less than a third (29%) aspire to purchase their first home in a city. This level of interest in city living from first-time buyers is remarkably low, as the UK has previously had a high rate of urbanisation and the country’s urban population sits far above the worldwide average.
Higher house prices in urban locations is likely to play a huge factor in this trend, as over two-thirds (65%) of respondents feel it is already “impossible” to get on the property ladder, the research found.
In addition, the average budget for a first home is now £174,266 ($237,804) — meaning popular destinations like London, which has an average first-time buyer property price of £463,536, are out of reach.
Research prior to the COVID-19 pandemic suggested city living was still popular, with London boroughs dominating the list of most popular destinations for first time buyers.
Watch: Why are house prices rising during a recession?
READ MORE: How to add 20% on to the value of your home
But, respondents said the coronavirus pandemic is exacerbating problems of affordability, and over a third (35%) said the financial impact of COVID-19 had left them priced out of the market.
Last year saw lenders withdraw a large proportion of high loan-to-value (LTV) mortgage products, which may also impact where first time buyers can afford to buy.
Despite a number of well-known lenders relaunching new high LTV mortgage deals recently, data from Trussle shows that there were just 163 90% LTV mortgage products available in December 2020, compared with 3,053 the year before.
As a result, buyers now need to save larger deposits — often 15% of the property price or higher, as many 90% LTV mortgages have disappeared.
As a result, two in five of those who have moved back in with mum and dad think it will take up to five years longer to save for a deposit, the survey found.
A lack of high LTV products would have a disproportionate impact on affordability in city centres where property is more expensive and would require more upfront savings, Trussle added.
READ MORE: Four factors that may impact UK property market in 2021
“The pandemic has increased the financial pressure many first time buyers were already feeling, as well as creating a seismic shift in what people expect from their home,” said Miles Robinson, head of mortgages at Trussle.
“As a result, financial pressures and rising house prices, alongside a desire for more outdoor space, means demand in more affordable rural locations is currently outpacing that for urban destinations.
“But, lenders are starting to return to the market with higher LTV products, which could make more expensive homes in the city more accessible again — and we may see renewed interest in city living once the vaccine has been rolled out and things begin to return to normality.”
Watch: Tough times for property owners after lost 'golden quarter’
