We are probably all familiar with the abbreviation "FTB" and its longer descriptor "first-time buyers", as the name is fairly self-explanatory describing those who are getting their first toe-hold on the property ladder by buying (rather than renting) their first home.
The term "second-steppers" is probably less familiar but is gradually gaining traction to describe those who are selling their first home and are looking to buy their next (or second) property, which is usually valued higher with greater appeal such as more bedrooms or greater outdoor space.
What Rightmove's data shows
Property portal Rightmove has analysed its data covering sales and purchases, specifically to look at these two discrete groups — the first-time buyer and the second-stepper — with a view to understanding the differences between the two.
The first surprising finding from the analysis is that the price gap between the two groups is now at its highest since the data was first gathered. This is an important piece of information since it shows that the cost pressures for first-time buyers in trading up to their next home are increasing.
Underlining this point is the acknowledgment that the average asking price for a three- to four-bedroom, mid-market second-stepper home is now 52% more than a home that has one or two bedrooms, which is a typical choice for the first-time buyer.
That means that those wishing to trade up to a second-stepper home will have to save up, on average, an additional £23,780 in equity in the home that they are selling as the deposit for their next home purchase.
Why flat owners face a tougher climb
Interestingly, the average cost of a flat has only increased by 8% in the last ten years, while this compares with 34% for houses. This is another important piece of information, since many first-time buyers opt for a flat as their first purchase with the plan to upgrade later to a house. With the huge disparity between the price inflation of flats and houses, many first-time buyers are potentially priced out of the ability to trade up to a house because of the lower amount of equity that they have accrued.
How the gap varies by region
Understandably, perhaps, the most expensive region of the country to trade up is in the South-East, while the most cost-effective trade-up can be found in Yorkshire and The Humber, as is shown in this table:
Region | Average asking price for typical FTB home | Average asking price for typical second-stepper home | Price gap (%) |
South-East | £286,748 | £460,781 | 61% |
London | £491,661 | £788,528 | 60% |
Scotland | £146,567 | £230,056 | 57% |
East of England | £269,079 | £410,949 | 53% |
South-West | £247,531 | £378,014 | 53% |
Great Britain | £226,955 | £345,857 | 52.4% |
North-West | £181,290 | £274,397 | 51% |
West Midlands | £193,401 | £290,575 | 50% |
North-East | £133,713 | £200,787 | 50% |
East Midlands | £193,250 | £281,520 | 46% |
Wales | £183,640 | £257,520 | 40% |
Yorkshire and The Humber | £182,029 | £251,885 | 38% |
Source: Rightmove
What the experts say
As Colleen Babcock, Rightmove's property expert, says of the findings:
"The race for space that began during the pandemic caused a major shift between houses and flats, and it's a shift we're still feeling today.
Flats, which make up a much larger share of first-time buyer homes and markets like London, have seen slower price growth, while houses have pulled further ahead.
Concerns around leaseholds and ground rents are also likely weighing on flat prices."
Adding to those comments, Matt Smith, Rightmove's mortgage expert, says:
"Inevitably trading up means borrowing more. Home movers usually take advantage of having built equity since the purchase of their first home to fund a larger deposit, meaning they have access to cheaper rates.
If equity is reduced, this means home movers are likely to look at alternative strategies, either through reducing their mortgage balance by overpaying, or boosting their deposit through savings.
They can look at taking more incremental steps up the housing ladder, or scout out alternative, cheaper locations.
If buyers are facing the prospect of moving up the ladder at higher Loan-To-Values, lenders do have options to support this — powered up by recent changes to affordability rules by the regulators."
Getting the right support
What is clear is the process of buying a home is an expensive business and, especially if you are new or relatively recent to the housing market, you should seek professional guidance to assist with the best way to procure your first or second homes.
Our conveyancers at Homeward Legal will start work on your plans as soon as you agree to the quotation and appoint them to represent you. We also operate a 'no completion, no fee' promise, which means that should the purchase or sale not go through as planned, no payment is required.
Call us now on to get your conveyancing quote started, or use our easy-to-use quote generator to get an instant figure.