Buyers ditch detached homes as rate reality bites, say property experts

In its August House Price Index, Nationwide stated that for owner-occupiers buying with a mortgage, the biggest decline in transactional terms was in detached houses.

Robert Gardner, chief economist at Nationwide, said: “There are signs that buyers are looking towards smaller, less expensive properties, with flats seeing a smaller decline.

“This shift may, in part, reflect the ending of the Help to Buy scheme, which helped those with a smaller deposit purchase a newly built home.”

Property and mortgage experts said the reason for the decline in demand for detached homes is a mixture of the end of Help to Buy, energy bills and affordability concerns.

Imran Khan, co-founder of PropertyLoop, told Newspage: “For the past 15 years, buyers have been living in a fantasy land, buying detached houses or five-bedroom mansions, buoyed by near-zero interest rates.

“The tide has now turned. As mortgage rates creep above 6%, a reality check is setting in. Affordability is the new buzzword: you buy what you can actually afford, not what you aspire to.”

Ross McMillan, owner at Blue Fish Mortgage Solutions, agreed that financial hardships were a key driver of the reduced demand for detached homes.

He said: “Loving thy ‘directly attached’ neighbour has become increasingly acceptable for many when compared to the alternative of detachment with an accompanying huge monthly mortgage payment.”

McMillan’s views were mirrored by Riz Malik, director of independent mortgage broker R3 Mortgages.

He added: “Detached homes typically command the highest prices in most areas.

“With the conclusion of the Help to Buy scheme, combined with increasing interest rates and the escalating cost of living, the appeal for such properties has been particularly affected.

“When borrowing was more affordable, it was feasible for many to transition directly from a flat to a detached home, bypassing terraced and semi-detached options.

“However, this pathway is now less straightforward.”

Matt Baldock, director at Charles David Casson, shared much the same view: “For many years, buyers have been able to move up the ladder a few rungs at a time. In fact, our average first-time buyer bought a three-bed house.

“Now, with higher interest rates, buyers are having to start a few rungs down and this has a knock-on effect. There was a thought a while ago that flats had become more desirable due to an increase in sales: they hadn’t, they were simply more affordable.”

Tim Murphy, chairman at IP Global, added that energy bills are also playing a part in the reduced demand for detached homes.

He said: “Detached houses are more expensive, significantly more than the average price of a semi-detached or terraced house. Detached houses are also less energy efficient.

“They tend to be larger and have more space, which means they require more energy to heat. This can be a major financial burden, especially in the wake of rising energy costs.”

Further reaction:

Scott Taylor-Barr, financial adviser at Barnsdale Financial Management:

“When you stop and think about it for a second, the shift to smaller properties is fairly easy to explain: monthly cost.

“People don’t buy things on total value, they buy things based on their monthly commitment.

“So if you want to buy a property and have a budget of, let’s say £1000 a month for your mortgage payment, you buy what that monthly payment allows.

“When interest rates were 1%, that £1000 a month could buy you a detached property, but now that interest rates have increased that same £1000 per month buys you a semi-detached or terraced property.

“It’s not people choosing to buy a smaller property over a larger one, it’s a case of that’s all they can now afford for the same monthly commitment.”

Stephen Perkins, managing director at Yellow Brick Mortgages:

“The end of Help to Buy will be a factor in this.

“With the scheme’s help, many buyers could stretch to the larger detached properties.

“Now, however, budgets will be limited to smaller or semi-detached properties.

“There will also be a trend of borrowers with large mortgages on large homes selling and downsizing to clear their mortgage, which also contributes to the increases in cash purchases.”

Christian Duncan, managing director at Manchester Mortgage Centre:

“Help to Buy has played a huge part in the large volume of detached properties coming to the market.

“Borrowers used Help to Buy to buy a property that might not have been affordable without the scheme. 

“Five years in and interest rates have skyrocketed, the cost of living has increased significantly, and consumers are feeling the pinch.

“Unfortunately, I don’t think we’ve seen the end of the new “ditch the detached trend”.  First-time buyers are now coming to us with a different approach.

“They are coming to us with a budget in mind, of what they can afford and are comfortable paying. Rewind 18 months ago and the first question from most first-time buyers was, ‘What is the maximum I can borrow?’

“I am pleased the mindset has changed. Hopefully, now that the market has slowed down slightly, it will give your first-time buyers a chance to secure their first home at a reasonable price.”

Elliott Culley, director at Switch Mortgage Finance:

“Inevitably, with rising mortgage costs and the cost of inflation hitting every part of daily life, potential buyers are more considered in their buying approach.

“Detached houses are more costly to run and demand a higher purchase price and naturally the appetite for this type of property will be reduced, adding to the downward pressure on prices.”

Rhys Schofield, brand director at Peak Mortgages and Protection:

“Unsurprisingly, the squeeze from higher rates is being felt the most on detached properties where buyers often stretched themselves to the max to buy when rates were cheap.

“Now, for many, it’s an uncomfortable burden. All that seems to be boosting demand for more affordable properties, while at the top end of the market where many transactions are cash, everything just seems to be going along merrily.”

Justin Moy, managing director at EHF Mortgages:

“Detached properties are more expensive than semi-detached or terraced versions of the same property, and in this current financial climate, buyers are putting size over style.

“The combination of low interest rates and Help to Buy encouraged builders and buyers to afford larger properties, but with both long since gone those same builders and buyers must change to more modest and affordable properties.

“There are plenty of first-time buyers happy to buy in this market, but they are being more cautious and realistic about their first home.”

Joe Garner, founder and managing director at Joe Garner Consulting:

“The UK property market has undergone notable transformations in recent years, influenced by a multiplicity of factors.

“While historically low interest rates have spurred demand and contributed to price appreciation in various regions, some buyers are shifting away from detached properties for several reasons.

“One prominent trend we’re witnessing is a preference for more compact and centrally located homes over larger, detached options.

“This shift can be attributed to a growing emphasis on convenience and urban living.

“Additionally, the conclusion of the Help to Buy scheme has undoubtedly impacted purchase decisions.

“As this Government initiative aimed to assist first-time buyers, its conclusion has prompted many to reevaluate their options.

“However, it’s important to note that while Help to Buy’s end has influenced some buyers, it’s just one piece of the puzzle in the broader evolution of the UK property market.”