The Rise in Popularity of the Second Stepper Property
This is a collaborative post
Given the ongoing cost of living crisis, with sky-high energy bills and mortgage repayments going through the roof, it is hardly surprising that doom and gloom predictions of a house price crash are everywhere right now. Indeed, most property experts seem to agree that a fall in prices of around 10% over the next 12 months should be expected.
From an affordability point of view, this, of course, makes sense. Since the summer of 2020, we have seen an unprecedented rise in house prices, with an average annual house price rise of 15.5% in July 2022, the highest rise since 2003, thanks to the impact of pandemic-induced government incentives like the stamp duty holiday, low-interest rates and the disparity between supply versus demand. This has particularly been the case when it comes to larger properties, offering more indoor and outdoor living space, as home offices and larger gardens have topped wish lists nationwide thanks to various lockdown periods and home working.
As we are tightening our belts in 2022 though, there has been a distinct cooling off amongst potential buyers. Indeed market activity has fallen since September, with new survey instructions and mortgage approvals falling to pre-pandemic levels and fewer property transactions taking place. There have also been more asking price reductions reported, up from 2% to 23% in October 2022 according to Rightmove.
However, there has been a property stalwart bucking the downward trend. The so-called “second stepper” home, traditionally a 3-4 bedroom semi-detached or detached property sought by homeowners wanting to move up the ladder from their first property and gain more space.
According to estate agents Knight Frank, the number of new homebuyers seeking this type of property has jumped by 27% in the past year and the property type getting the most interest on Rightmove right now? You guessed it, the three-bedroom semi.
The popularity of family homes in catchments areas for good schools is nothing new for ‘upsizers’, with many happy to pay over the odds for their home if it means saving thousands on school fees and lands them a premium property in a sought-after location. However, today it seems, the “second-stepper” is the holy grail for a multitude of different buyers – more so than any other property type in fact – spinning the traditional property ladder on its axis.
Indeed, as the average age of the first-time buyer has increased, and therefore in many cases, so has their salary and the size of their deposit, lots of savvy first-time buyers are leaping up the property ladder a few rungs. Given the cost of moving house – currently around £12,000 on average – it makes sense to secure longevity in a home which will grow with you wherever possible.
At the other end of the market, empty nesters whose children have left home are looking to downsize without losing too much space. Particularly as concerns grow over rising energy bills this winter, which is encouraging many downsizers to take the plunge. According to Savills, a whopping 77% of buyers are now taking into account the amount they will need to spend on energy in a new home before they buy, with smaller, more energy efficient new-builds popular.
Interestingly, many downsizers are also taking advantage of the equity in their previous homes to help their children get a foothold on the property ladder by increasing their deposits to make mortgage rates more manageable. Indeed, this homeowner group could unlock an impressive £129,000 on average from their existing properties by downsizing. Of course, inadvertently this does pitch parents against children when it comes to the types of properties they are searching for, as one heads up the property ladder and one down. By selling larger, more expensive homes during the recent housing boom, downsizers are often able to buy a new property mortgage-free, in cash, keeping the price of second-stepper homes in popular areas high and making it hard for first-time buyers and second steppers to compete, especially with rising interest rates and more expensive mortgages repayments to consider.
The continued popularity of three and four-bedroom properties amongst such a broad range of buyers, and the shortage of these homes available to buy right now versus this strong demand, means that many second stepper properties have been shielded from the impact of falling house prices – so far.
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