UK house prices will continue to fall into 2024 and will not start to recover until 2025, according to a new report from Lloyds Banking Group. Indicating a 11% decline in property prices compared to its peak last year, this comes as welcome news for prospective first-time buyers who have been locked out of the property market since December 2021 – which marked the first of fourteen consecutive rises. As analysts suggest interest rates have reached its peak – with the base rate expected to drop to 3% by 2025, according to Capital Economics – David Hannah, property expert and Group Chairman of the UK’s leading property tax experts, Cornerstone Tax, explains that this provides first-time buyers with the opportunity to regain control of their purchase and take their first step on the ladder.

To help prospective first-time buyers navigate one of the most confusing markets worldwide and take advantage of falling house prices, Hannah has provided six tips to ensure they’re not losing out on one of the biggest purchases of their lives.

1. Explore different neighbourhoods and types of properties to identify areas that may be more resilient or have factors that could lead to a quicker recovery:
Consider whether your desired area is expected to appreciate or depreciate in the coming years. In a fluctuating market, it’s important to do your research on how resilient your chosen neighbourhood is in terms of property value to consider the long-term benefits of the purchase.

2. Price Negotiation:
In a declining market, buyers have more negotiating power. Use this to your advantage to negotiate a price that works best for you. If you get a pre-approval for a mortgage, it will give you a clear picture of what you can afford and demonstrate to sellers that you are a serious buyer.

3. Renting vs buying analysis:
Given falling house prices, it may be wise to conduct a thorough cost-benefit analysis of renting versus buying in your desired area. In some cases, it may be more financially prudent to continue renting to save for a future down payment. Compare any initial costs (deposit, closing costs), monthly costs (mortgage payments, property tax, insurance, maintenance and HOW fees), and long-term costs including the potential for home equity growth or loss, with the costs of renting. Remember to also consider whether flexibility or stability is more of a priority.

4. Seek professional advice:
This may sound like a given, but almost half (47%) of first-time buyers ended up regretting the speed or level of their offer, according the government reports. Seeking professional advice – from a financial adviser to real estate professionals – is critical for gaining a better understanding of market conditions. Enlisting a professional’s service can also provide you with personalised insights based on your financial situation alongside local market conditions.

5. Government and lender initiatives:
Keep an eye on government incentives for first-time buyers and be open to outreach programs from banks such as Lloyds, who offers debt advice and potentially better rates. New reports suggest a string of new measures set to be introduced in next month’s Autumn Statement. This includes a potential extension of the mortgage guarantee scheme for an additional year which allows people to take out a mortgage with just 5% of their deposit, reduction of stamp duty and the introduction of new ISA products to encourage first-time buyers to save for a deposit.

David Hannah, Group Chairman of Cornerstone Tax, comments: 

“First-time buyers have spent the past two years anxiously waiting as mortgage rates continue to surge at exponential rates. Now with news that house prices are set to fall into 2025, navigating the property market requires a different approach. Ensuring you have all your ducks in a row by speaking to the right people, doing the research, and looking for schemes that can financially assist you has never been more important, particularly given that the current economic climate has already stung so many British households.

“I think that one of the key considerations first-time buyers should keep in mind is to embrace a long-term perspective when making a decision. Exploring different neighbourhoods and types of properties, for instance, can give you a better idea of the area’s resilience and potential recovery. Make sure that you have a comprehensive understanding of the market dynamics and have a clear goal of your lifestyle needs, so that you’re in a favourable position when negotiating and can make a well-informed decision to avoid any regret after the sale.”

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