The demographic profile of active homebuyers is shifting towards first time buyers (FTBs) and buy to let (BTL) investors in the UK at the close of 2021. Affluent households capable of moving home were highly incentivised to do so with the stamp duty holiday and concurrent access to low mortgage rates.
The level of UK housing transactions reached 1,552,000 in the year to September 2021, already eclipsing the average annual transaction levels across 2017 to 2019 at 1,196,000, according to Savills data. Relative to these preceding years, buyer categories up to June 2021 comprised 13 per cent more first time buyers; 31 per cent more mortgaged home movers; 31 per cent more buy to let investors and 22 per cent more cash buyers.
The end of the stamp duty holiday in September removed a key incentive for mortgaged home movers especially who now have to pay tax on anything over £125,000 in value of the home. Meanwhile FTBs do not pay any such tax on anything up to the homes priced at £300,000 . Moreover, FTBs are able to take advantage of other schemes, including the mortgage guarantee, first homes, deposit unlock and help to buy schemes, which enhance their access.
From the BTL perspective, the paucity of supply of homes to the market and completion represents a significant opportunity. Savills data indicates that housing completions fell 15 per cent over the course of 2020/21, whilst housing starts are down 25 per cent year on year. This will continue to induce upwards pressure on house price inflation, driving greater demand for homes in the rental market.
Lettings rates reached a thirteen year high for growth as of September, according to the latest quarterly house price index report from Zoopla. This is representative of a 6 per cent annual increase, with a 3 per cent increase in the last quarter alone demonstrating remarkable acceleration. Given forecasts of further growth of 4.5 per cent in 2022, BTL investors are well positioned to take advantage of this market demand.
We also expect large institutional investors to back the delivery of more homes for private rent. The number of homes built specifically for the private rental market doubled between 2016/17 and 2019/20, from around 7,000 to 14,000 completions. With rising investor demand for homes in suburban and town locations, we believe delivery could more than double again to 30,000 annual BtR completions by 2025/26.