Affordability improvements for first-time home purchases are reshaping the UK property landscape, with a significant shift away from traditional starter flats towards houses creating what experts warn could be a valuation crisis for city centre apartments.
Affordability Improvements Changing Buyer Behaviour
According to Nationwide's Chief Economist Robert Gardner, housing affordability has improved across most of the UK over the past year, with Northern Ireland being the sole exception. The organisation's main affordability benchmark reveals that a typical first-time buyer with a 20% deposit would now spend approximately 32% of their take-home pay on mortgage payments.
This figure represents a notable decrease from the recent peak of 38% recorded in 2023, though it remains slightly above the long-term average of 30%. This improved financial position is enabling prospective homeowners to purchase properties they can grow into over time, rather than opting for smaller starter homes they would need to upgrade within a few years.
Leasehold Fears Driving Property Choices
Kundan Bhaduri, Portfolio Landlord at London-based The Kushman Group, explains that buyers are increasingly wary of leasehold arrangements and are stretching their budgets to secure freehold houses instead. "Buyers are terrified of becoming trapped in a leasehold nightmare where they have no control over their costs," Bhaduri stated.
He further noted that prospective homeowners have calculated the substantial costs associated with frequent moves, including stamp duty, legal fees, and estate agent commissions. In today's high-tax economy, moving every few years has become financially impractical for many.
Valuation Crisis for City Centre Flats
Bhaduri issued a stark warning about the potential consequences of this behavioural shift: "This spells disaster for the valuation of city centre flats, which are rapidly becoming the sub-prime assets of the UK housing market." His company's response has been to purchase entire buildings with freeholds included, thereby maintaining control over the complete asset portfolio.
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, confirmed this market transformation: "It's now crystal clear that more savvy first-time buyers are looking beyond traditional starter homes, such as flats, and setting their sights on houses as they benefit from improved affordability."
This strategic approach allows buyers to avoid repeated stamp duty payments and other transaction costs associated with frequent property moves. The era of climbing the property ladder through regular two-to-three year moves appears to be ending, replaced by a more settled approach to home ownership.
Long-Term Market Implications
The combination of improved affordability, leasehold concerns, and transaction cost awareness is creating a perfect storm for city centre flat valuations. As first-time buyers increasingly bypass traditional starter properties in favour of longer-term homes, the demand dynamics for different property types are undergoing fundamental change.
This shift represents more than just temporary market fluctuation—it signals a structural change in how UK residents approach property ownership, with potentially lasting consequences for urban property markets and investment strategies across the country.
