People purchasing their first home appear to be aiming higher up the property ladder.
The price of flats is falling as first-time buyers leapfrog their way on to the second rung of the property ladder.
The average cost of a flat fell by 1.6% in the year to the end of April to stand at £199,018, according to the Land Registry.
By contrast all other property types increased in value, with detached houses seeing the biggest year-on-year gain of 2.7%, followed by semi-detached homes at 2% and terraced properties at 1.9%.
Property commentators attribute the trend to first-time buyers delaying the purchase of their first home, then buying a more expensive property further up the ladder when they do take the plunge.
There is also the suggestion that while young people are quite happy to rent a flat, they do not necessarily want to buy one.
Why is this happening?
Some of the fall in the price of flats can be attributed to the current absence of buy-to-let investors in the market.
But this trend has been playing out over the past two years, following a raft of government tax hikes that made the sector less profitable, and it is unlikely to account for all of the fall.
Instead, it is thought that first-time buyers who traditionally compete with investment landlords for homes at the bottom of the property ladder are also shunning flats.
With the average age at which people purchase their first home increasing, many are instead thought to be jumping straight to properties that would be suitable for a young family.
Who does it affect?
Reducing the number of steps they take on the property ladder is a smart move for first-time buyers.
The typical move involving a house purchase costs £12,000, according to Lloyds Bank.
At the same time, while first-time buyers are exempt from stamp duty on the first £300,000 of a property purchase, this tax break does not apply to those trading up the ladder.
As a result, delaying the purchase of a home until they can afford an average priced semi-detached house costing £216,938, will save first-time buyers £1,838.76 in stamp duty.
What’s the background?
One of the reasons first-time buyers are able to leapfrog a rung of the housing ladder is likely to be due to the range of initiative’s available to help them purchase a home.
Under the Help to Buy equity loan scheme, people can purchase a new-build property with just a 5% deposit, with the Government topping this up with a five-year interest-free loan.
With the typical semi-detached home costing 9% more than a flat, this loan would be enough in many areas of the UK to enable first-time buyers to purchase something higher up the ladder.
The Shared Ownership scheme, under which people can buy a share in a property of between 25% to 75% and rent the rest, also enables young people to afford to buy larger properties.
Top 3 takeaways
The price of flats is falling as first-time buyers leapfrog their way on to the second rung of the property ladder
The average cost of a flat fell by 1.6% in the year to the end of April to stand at £199,018
By contrast all other property types increased in value, with detached houses seeing the biggest year-on-year gain of 2.7%, followed by semi-detached homes at 2% and terraced properties at 1.9%