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Buyers ditch detached homes as rate reality bites

Journalist: Riz Malik

ended 01. September 2023

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

Robert Gardner, Nationwide's Chief Economist, 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 — by a distance — affordability. Or rather the lack of it.

Imran Khan, co-founder of Canary Wharf-based PropertyLoop, said that “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 Glasgow-based Blue Fish Mortgage Solutions, agreed that hard financial reality is a key driver of the reduced demand for detached homes: “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 Southend-on-Sea-based independent mortgage broker, R3 Mortgages: “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 of director at Chelmsford-based estate agent, 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 3-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 global real estate experts, IP Global, added that energy bills are also playing a part in the reduced demand for detached homes: “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.”

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12 responses from the Newspage community

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Riz Malik
Independent Financial Adviser at R3 Wealth
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.
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Matt Baldock
Director at Charles David Casson
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 3-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 just more affordable. Another reason being missed is that it's not to do with desire or ability to buy but actual availability. Just 20% of available properties in my city are detached. Traditionally, detached homes will be occupied by older people who are mortgage-free and so (broadly) under no financial pressure to move due to interest rates and no lifestyle pressure due to growing families. So until these owners decide to downsize, there won't be the availability and so the registered sales will be down. Plus let's remember a lot of detached homes would have been bought in the stamp duty cuts.
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Imran Khan
Co-founder & CEO at QuantumLoopAI
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. This downward shift in purchasing power has created a chain reaction in the market, affecting each level, from penthouses to semi-detached homes. Forget 'Help to Buy', we're entering a 'Help Yourself' era where realism trumps aspiration. In this environment, expect rates to be higher for longer, forcing buyers to tighten their belts and make practical choices.
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Joe Garner
Founder & 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.
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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.
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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.
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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.
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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.
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Ross McMillan
Owner/Mortgage Advisor at Blue Fish Mortgage Solutions
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. With most detached homes sitting at the middle to the higher end of the housing market, it's no surprise to see the data now reflecting a significant slowdown in activity in this area throughout 2023. Supply of detached homes is currently very limited as homeowners in this sector are opting to stay put rather than continue to climb up the housing ladder and so this, combined with affordability constraints on buyers due to the higher rates we now have, means that for those looking to move home this year, compromises are being made as practicalities hold sway over preferences.
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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.
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Scott Taylor-Barr
Principal 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 £1000pm 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.
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Jai Khandpur MRICS
Investment Manager at IP Global
Detached houses are more expensive, significantly more than the average price of a semi-detached or terraced house. This makes them less affordable for many buyers, especially first-time buyers. 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. Buyers are increasingly opting for smaller properties, such as apartments and townhouses. This is due to a number of factors, including the rising cost of housing, the desire for a more convenient lifestyle and the move back into city centres post-COVID. Buyers are also becoming more aware of the importance of energy efficiency, and are increasingly looking for homes that are well-insulated and have energy-saving features.