First-Time Buyers And The Current UK Residential Property Environment

We are all very aware of the financial barriers which are holding back first-time buyers for housing in the UK. Between rising house prices and stagnant salaries, it has become nearly impossible for most people to get on the property ladder. Despite this ongoing media driven national narrative, it was however widely reported that towards the end of 2024 the rate of first-time buyers getting on the property ladder had risen significantly. While change this could be attributed to first-time buyers becoming more adept with the housing market, rather than market conditions becoming significantly better, it is widely believed there may be another factor at play. There are mounting rumours that the Chancellor of the Exchequer is reviewing stamp duty allowances and the way in which cash ISAs are dealt with within the UK tax regime. Cash ISAs are a key saving tool for many first-time buyers. Understandably, many first-time buyers, if they are in the position to make offers on houses on the market, have tried to make them ahead of these impending changes to potentially save thousands on their tax bills and on stamp duty.

Despite Labour’s focus on housing and introducing one of the most ambitious housebuilding targets seen in years, what does this mean for first-time buyers? With rumours swirling regarding tax increases on cash ISAs and stamp duty, it remains to be seen if this helps with Labour’s focus on house building and alleviating the challenge of getting home ownership.

Labour has pledged to get Britain building, with some local authorities having their housebuilding targets rise by 400%. Whilst there is no doubt that these housing targets are putting local councils under extreme pressure, it should provide some relief to first-time buyers during the medium to long-term. Affordable housing has become a stricter requirement for new builds, which in turn helps those trying to purchase their first property. The increased supply of homes should also help stabilise the pricing of homes in the UK and give first-time buyers a greater chance of succeeding in the long run.

The new housebuilding agenda has also prompted a review of the Right to Buy Scheme. Right to Buy was designed to help make purchasing property more affordable for first-time buyers and especially targeting those from lower income backgrounds. It also allows for those living in social housing to purchase their home. According to the Ministry of Housing, Communities and Local Government (MHCLG), the proposed changes outlined in the consultation seek to deliver a ‘fairer and more sustainable’ scheme; one that balances a ‘way for long-standing tenants to buy their homes’. An in-depth consultation is expected in the Autumn to further reform Right to Buy, something that the Secretary of State at the MHCLG, Angela Rayner MP, said is ‘long overdue’. This of course would work in favour of first-time buyers by finding ways to make homeownership more accessible and relinquishing them of the pressure of stockpiling an enormous deposit.

In theory, a lot of these above steps will be meaningful and necessary for first-time buyers. However, it is important to acknowledge the changes that are working against first-time buyers as well. As previously mentioned, there have been considerable rumours that Rachel Reeves will be looking to minimise the tax-free allowance on cash ISAs. Cash ISAs are a primary source used by first-time buyers to save for a deposit. Popular because of their, usually, higher interest rates and tax-free allowance on savings. The cash ISA currently has a limit of £20,000 pounds tax-free savings but it is anticipated that in her Spring Statement Chancellor Reeves could lower the allowance to £10,000 or maybe even £5,000. Cash ISAs are a lifeline for a lot of savers. However, ISA tax breaks cost the Treasury almost £7 billion pounds a year in lost tax revenue. There has been considerable speculation that Rachael Reeves wants to push savers into opting for stocks and shares ISA’s instead.  In an article from the Financial Times, it stated ‘The British are decent savers but bad investors’. Barclay Banks estimates that £41 billion of ‘possible investments’ could be held in cash deposits in UK savings accounts. This of course would support the Chancellors view that British people and indeed the British economy would do better if we didn’t stockpile cash in various savings ISAs. This advice not to save large sums of cash seems alien to all the conventional advice that is given to first-time buyers to scrimp and save for the deposit! First-time buyers who have been saving for a long time may feel that the goalposts are moving and being strong-armed into investing their money instead of saving.

It is fair to say in the long term it could be very positive to encourage young people to invest and learn about the world of stocks and shares. However, in the short term, and for people who have been saving for years, increased taxes on savings are just plain deflating. Labours’ new ambitious house-building targets provide some optimism about the housing market and its direction. Right to Buy and more houses being built should help to regulate prices in the long run. However, for first-time buyers right now, this is a swift change from the status quo. The tax breaks provided by ISAs are a lifeline for many savers and any change will undoubtedly draw out the processes further for those hoping to buy in the near future.