Market analyst company Hometrack predicts that first-time buyers will overtake homeowners to become the largest buyer group in 2018, accounting for the highest share of all sales (35%) in a decade.
With affordability pressures leading first-time buyer numbers to fall by 10% in London over the last three years, the idea of purchasing a first home in the regions has appeared more attractive. Yet with regional markets expected to offset weak house price growth in London, over the next two to three years they could register house price rises of up to 25%, Hometrack says.
Manchester, Birmingham and Glasgow have seen an increase in market activity and this has delivered above-average price growth of 6-8% for the last 12 months.
A year ago Hometrack was optimistic among forecasters of house prices in 2017, projecting an increase of 4% on the basis of a continued pick-up in regional housing markets offsetting weak price growth in London.
Twelve months on, the firm says it expects 2018 to follow a similar pattern with the UK’s top 20 cities registering house price growth of 5% over the year. For the UK as a whole Hometrack predicts house prices will increase by 3%.
Richard Donnell, Insight Director at Hometrack, commented: “Housing sales have been stuck at 1.2m for the last 3 years and we don’t expect this to change over 2018. Sales volumes have been falling in south eastern England and are down 16% in London since 2014. However, first-time buyer purchases have been taking a growing share of sales.
“We are currently halfway through the current housing cycle that started in central London and is now spreading further afield as the economy grows and mortgage rates remain low. London house prices are up 70% since 2009 but affordability levels are stretched to an all-time high (14x earnings) with sales volumes down and house price growth (+2.9%) failing to keep pace with inflation.
"London is facing a drawn-out period where house prices and earnings need to re-align – we expect the rate of house price inflation to remain in low single digits over the course of 2018 with prices falling in real terms.”