First-time buyers now account for 28% of the property sales market thanks to bank of mum and dad plus increased levels of government help

Claims that the rising cost of buying a first home is preventing tenants from getting on the property ladder appear to be at odds with statistics from the National Association of Estate Agents.

At a time when official data shows the price of a first home in the UK has topped £200,000, figures from the NAEA show that first-time buyers account for 28% of the property sales market.

This is a sharp rise from October 2011, says central London estate agent LDG, when first-time buyers accounted for just 16% of residential property sales in the UK.

However, it is below the levels reported in the US, where the share of first-time buyers was 32% in April 2016, up from 30% both in March and 12 months previously.

On this side of the Atlantic, many UK-based estate agents put the rise in market share among first-time buyers down to…

• A wider choice of cut-price mortgage deals for first-time buyers;
• More government help for people purchasing a first property;
• The introduction of a 3% stamp duty surcharge for buy-to-let investors; and
• A willingness from parents to help their children onto the property ladder.

There has never been a wider choice of home loans available to first-time buyers, says Fulham estate agent Lawsons & Daughters.

However, many of the better deals are only available to buyers with deposits of at least 20%. This suggests that purchasers with average incomes are receiving help from family members, not just in raising deposits but also to pay for the costs of buying a home, which include stamp duty and legal fees. 

The typical image of the tenant is also changing. A spokesman for London Bridge estate and letting agent Williams Lynch says many of the landlords on its client list rent their investment properties to professionals from outside London who land well-paid jobs in the City.

In our experience, many first-time buyers move into their new homes after spending a number of years living with their parents or other family members in order to raise the deposit needed to buy a first home, a spokesman says.

However, the introduction of a 3% stamp duty surcharge for buy-to-let investors, which came into force in April, could limit the supply of rental homes in London and give first-time buyers a wider choice of properties to choose from.

But the factor likely to do most to help first-time buyers take a greater share of the property sales market is an increase in government help.

The London-only Help To Buy equity loan scheme allows first-time buyers who raise a 5% deposit for a new-build property to borrow up to 40% of the purchase price from the government.

The 40% government loan is interest-free for five years, and after that time borrowers will be charged a fee of 1.75% of the loan’s value. This fee will increase every year at 1% above the rate of inflation.

A second element of the government’s Help To Buy scheme is available for purchasers of both new-build homes and older properties.

Like the Help To Buy equity loan, the mortgage guarantee scheme is available to first-time buyers and home movers who raise a 5% deposit towards the purchase of a property worth up to £600,000 – on the condition that the purchase will be their primary residence and not sub-let.

Under this scheme – which cannot be used in conjunction with any other assistance such as shared ownership or shared equity – the government provides the mortgage lender with a guarantee for a further 15% of the property’s value.

Getting on the property ladder in London remains a huge financial step, but a combination of parental help, government assistance and ultra-low mortgage rates are helping to ensure a first home is no longer an impossible dream for many.