The amount of FTBs entering the property market is forecast to decrease from 370,287 in 2022 to 290,000 last year, the lowest number since 2013.

However, the decline was less than the 30% drop in overall purchaser numbers; the percentage of FTBs involved in new house purchase activity in the mortgage market rose to 54%, compared to 53% in 2022 and 50% in 2021.

In addition to a fall in FTBs potentially hindering the sales of certain property developments, the construction industry has been widely seen to be impacted by tough economic conditions, including increased material and labour costs and higher interest rates and inflation.

2023 saw a decline in construction starts  according to Glenigan, with the three months leading to November seeing a 12% fall in residential construction starts year on year.

YBS claimed that while cost-of-living pressures, higher house prices, and climbing interest rates have made it harder for borrowers to meet affordability requirements, FTBs are still determined to get a foot on the property ladder.

Ben Merritt, director of mortgages at YBS, commented: “FTBs are the lifeblood of the market and are still clearly keen to buy — there is no doubt their aspirations are being hampered by the multiple factors at play.”

DFT asked industry professionals how fewer FTBs in the market could impact the development and construction industry.

Chris Gardner, CEO at Atelier, commented: “The property market is an ecosystem and its overall health is reliant on it functioning across the different buyer groups. 
“It is true that FTBs are the lifeblood of the market but, unfortunately, the odds remain stacked against them.

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“The cost of borrowing has risen sharply, Help to Buy has ended and, most frustratingly, mortgage lenders continue to penalise new builds by capping LTVs at around 75%, which is around 20% less than the ratio offered for second-hand properties.

“In the current market, FTB deposits for new builds are unaffordable, particularly when you draw up a comparison with second-hand properties.

“Developers selling new stock aimed at the FTB market will face challenges in the coming months as people continue to struggle to get a foot on the ladder.

“In turn, this is will also put pressure on the rental market, as those locked out of buying will continue to rent, stoking demand and pushing rental inflation even higher.

“The key to unlocking the housing market sits with lenders; higher LTV ratios from mortgage lenders in the year ahead would help stimulate the flow of new buyers into the market, while also encouraging developer appetite.”

Steve Larkin, head of development finance at LendInvest, anticipated that house prices and higher interest rates will still put pressure on FTBs this year, which will continue to be a hurdle for the development market this year.

“The news from the last 48 hours is positive in that mortgage rates from some lenders are coming down… and the hope that the bank base rate may see its first reduction in May.

“We are seeing sales of new stock in the development market, but these are taking longer than previously as the changing markets and sentiment continue to cause anxiety to prospective purchasers.”

Guy Murray, head of development finance at West One, was more optimistic: “My view is the decline in FTBs has already had its impact on slowing new-build sales last year, so we have weathered that storm, and I expect more FTBs to come back into the market in 2024 compared to 2023, given the forecasted interest rate drops which will be more supportive of the development market.”