First-Time Buyer Delays Benefitting UK Expat and Foreign National Investors

first time buyer delays

The increasing number of first-time buyer delays in the property market is leaving more room for UK expat and foreign national investors in the property market.

Domestic First-Time Buyers Delaying Home Purchase Plans.

As we entered into Autumn, we wrote our UK Expat and Foreign National Autumn Market Investment Outlook. One of the key points of our Autumn market outlook was that much of the strength of the domestic property market will depend upon how first-time buyers respond in the marketplace. At the time, Liquid Expat Mortgages predicted that the domestic first-time buyer market was likely to suffer because of the increasingly difficult domestic conditions. And, according to Zoopla, it seems like that prediction is coming true as they report that first-time buyers are delaying their plans to purchase a home by two years in response to the market conditions.

According to Zoopla, almost 75% of first-time buyers have had their house purchase aspirations hurt by rising prices. A third of first-time buyers have delayed their plans to buy a property by an average of 20 months, 19% are planning to buy a cheaper home, and 64% have had to reduce the amount they save each month. For those domestic buyers that are choosing to buy in the current conditions, the terms on which they are purchasing are reflecting the current market, with a record 38% of buyers using mortgage terms of 30 years or more in June. This means that these buyers will pay a far greater amount in interest over the duration of their mortgage, massively adding to the cost of their investment.

Why is This Important?

‘The impact that the market conditions are having on first-time buyers is important as first-time buyers were propping up the market, accounting for 35% of all property market transactions’ says Stuart Marshall. ‘This made sure that both demand and prices have remained fairly robust. With many first-time buyers unable or unwilling to purchase property in the current conditions, the investment market will become more fertile for UK expat and foreign national investors. For one, the UK housing market will be slower, leading to more choice, lower prices and the possibility of further price reductions for those properties that have been on the market for a while. The other effect of having fewer first-time buyers in the market is that there are greater numbers remaining in the rental market too. With the rental market already home to fierce competition, greater numbers will only contribute to increased competition for rental properties and higher rental prices. This means that UK expat and foreign national investors are likely to see continued high yields, strong demand, rental growth and minimal void periods because of the competition.’

‘The first-time buyer situation is also unlikely to change. Inflation is at a 40-year high which means that first-time buyers have less money to save for a deposit. It also means that the Bank of England is increasing interest rates to reduce inflation, which is impacting borrowing dramatically for first-time buyers. To put the damage that a higher interest rate will cause into perspective, increasing mortgage rates from 2% to 5% means that the average first-time buyer will need to earn £21,250 more a year for their repayments to remain affordable. In response, first-time buyers can only buy a cheaper property, save a larger deposit, or opt for a longer mortgage term. And many of these options are undesirable or impossible for a huge number of first-time buyers.’

Meanwhile, the pool of UK expat and foreign national buyers is growing as they continue to benefit from a weak pound, which is leaving UK house purchases far cheaper for overseas buyers than for domestic buyers. In addition, overseas first-time buyers will benefit from the stamp duty reduction as they are better positioned to purchase properties. The greater numbers of would-be property buyers in the rental market will make sure that rental yields stay high for UK expat and foreign national investors, and these higher yields will further offset the increased cost coming from higher mortgage rates. It’s worth noting that the UK expat and foreign national mortgage market is also very different to the domestic mortgage market and with strong interest from overseas buyers, it’s likely that lenders will try to introduce enticing deals with preferential rates to attract business. To gain access to the best of these deals, it’s worth discussing investment with a UK expat or foreign national mortgage broker. These brokers will be aware of the marketplace and can help to navigate a tricky situation at an incredibly volatile time when deals are being added and removed every day. These brokers can also help to find an investment property that best suits the needs of the investor, make the purchase process as smooth as possible, and they often have access to exclusive deals with lenders.

Liquid Expat Mortgages
Ground Floor, 3 Richmond Terrace,
Ewood, Blackburn
Phone: 0161 871 1216

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