Assisted by the Government's now-obsolete Help to Buy programme – and sometimes with discounts and offers from the developer – newly built flats in regeneration schemes were typically the stamping ground of the first-time buyer.
Although there is a price premium on brand new homes over existing ones, a small, purpose-built studio or one-bedroom apartment is often the most affordable way onto the property ladder.
However, the number of first-time buyers purchasing a home on a new development has dwindled in the absence of the state-backed, shared equity scheme Help to Buy – which ended last March – and following the prolonged spell of interest rate rises.
Prior to the pandemic 45 per cent of purchases of a new built home in London were made by first-time buyers.
This number has plummeted to 27 per cent, according to new data from Savills.
The analysis reveals that the average first-time buyer can only afford to buy a new build property in just over a third of postcodes in London, limiting choice and appeal for these young buyers trying to settle down in the capital.
Typically, these postcodes are on the very outer reaches of the capital.
"First time buyers seem to be struggling to access the new build market," says Gaby Foord, analyst at Savills.
She identifies barriers such as location, price and product types. "As well as the loss of the significant helping hand that was Help to Buy," Foord adds.
Building the wrong homes for young Londoners
The average first-time buyer has aged over the last two decades. Typically, this home buyer is 34 and either looking for a place with enough room to start a family or needs space for a study.
In fact, over 40 per cent of workers in London are either fully working from home or hybrid working and 80 per cent of those earning over £50,000 work from home at least part time.
However, London is suffering from an oversupply of studios and one-bedroom flats, following a house building era of micro homes in which as many homes as possible were thrown up in a city constrained by its green belt.
Stretched affordability in the capital and prohibitive stamp duty on bigger properties means that first-time buyers are trying to limit the number of times they have to upsize.
Their starting point is no longer a studio flat but a small family home.
"Smaller one-bed and studio properties are not a practical option. They do not account for the space needed to accommodate the shift in working practices post Covid," Foord continues.
The research shows that of the recent Help to Buy users in London, just nine per cent bought a one-bedroom pad.
More than half bought a two-bedroom home with 40 per cent choosing a three-bed or larger.
"In search for more space or room to grow their families and change lifestyles, first-time buyers are turning to the second-hand market even though these new homes are likely to be of lower quality then new builds," she says.
Where can first-time buyers find cheaper, bigger homes?
Based on current new build pricing, the average first time buyer with a 30 per cent deposit can only afford to purchase a two-bedroom property in 34 per cent of London postcodes.
On the assumption that interest rates will start edging down from the current base rate of 5.25 per cent in the second half of the year, wage growth will rise, and house prices will adjust down, Savills predicts that the best value postcode for first-time buyers in 2025 will be Harlington, in the town of Hayes in Hillingdon, near Heathrow airport.
Thamesmead, the former sink estate in the midst of transformation, is second in the ranking followed by Croydon, in south London, and South Norwood. Sutton, also in the outer reaches of south London is fifth.
"These outer areas not strangled by planning may offer a more affordable route onto the housing ladder," says Foord.
All these postcodes are undergoing significant regeneration that will bring with it the delivery of new homes on a large scale, ranging from the upgrading of tired town centres to the transformation of old industrial land into a new place.
There are 100 small schemes in the pipeline in Croydon. The other areas forecast to be the most affordable first-time buyer hotspots in 2025 include Wembley, Harrow, Bermondsey and Southall.
First-time buyers will await the Budget in March when the Chancellor Jeremy Hunt could announce a new iteration of Help to Buy.
The scheme, first introduced in 2013, divided opinion.
It was perceived by some to boost sales and therefore inflate prices artificially and others as a necessary way to encourage housebuilders to build new homes, giving them some certainty that they will sell them.
