UK 'Second Steppers' Face Housing Market Gridlock

A growing number of homeowners, often referred to as 'second steppers,' are encountering significant difficulties selling their initial properties, hindering their ability to purchase larger homes. This challenge is particularly acute for those who own flats, a segment of the property market that has seen stagnant value growth compared to houses.

While first-time buyers typically target flats, this market sector has been hampered by issues such as leasehold complications, escalating service charges, and concerns over cladding. Over the past eight years, UK house prices have risen by approximately 43 percent, but flats have only increased in value by around 10 percent, according to data from Zoopla. This disparity has created the widest gap in 30 years between the average cost of a flat and a house, with houses now costing 1.7 times more than flats.

This market dynamic creates a deadlock for 'second steppers.' Tom, a 40-year-old homeowner from south-east London, experienced this firsthand. After a year of failed sales attempts on his two-bedroom flat, he eventually managed to upsize to a three-bedroom house. He described the process as dealing with "endless forensic and unrealistic buyers unwilling to pull the trigger," while simultaneously competing with numerous other offers for his desired property.

Compounding the problem, 'second steppers' often find themselves competing against downsizers who may have greater purchasing power or older first-time buyers who have bypassed the flat stage entirely to purchase smaller houses. Furthermore, rising mortgage rates and transaction costs like stamp duty widen the financial gap between selling their current home and affording their next one.

To overcome these obstacles, some homeowners are reassessing their priorities. Tom, for instance, compromised on the style of home he purchased. Others are considering changes to their desired location. Research by Savills highlights the significant price differences between typical two-bedroom flats and three-bedroom houses across different regions.

In London, the average price gap is £232,319. This difference reduces to £131,869 in the South East, £97,638 in the South West, and ranges between £70,000 and £78,000 in the Midlands. The smallest gap is observed in the North East, at £65,236. Lucian Cook, head of residential research at Savills, noted that elevated mortgage rates make it challenging for those looking to upsize, particularly in London and the South East, though opportunities exist in other areas, often requiring buyers to search further afield.

Hayley, 34, has been trying to sell her two-bedroom flat in Greenwich for a year, aiming to move closer to her parents in St Albans. She and her husband hope to sell their flat for between £450,000 and £460,000, but three-bedroom houses in St Albans cost between £700,000 and £750,000. Hayley has changed estate agents twice and reduced the asking price, but with many similar flats available on the market, finding a buyer in London has proven difficult.

Estate agents suggest that modest improvements, such as updating decor, kitchens, or bathrooms, can help accelerate sales. Chris Husson Martin, director of sales at Hamptons, advises that second-steppers are increasingly adopting creative approaches to their property searches, sometimes expanding their search radius to areas offering better value in exchange for more space or improved long-term prospects, even if it means a longer commute.

Some buyers are opting to bypass the traditional first-time buyer market altogether. Sam and Victoria Hoare, for example, purchased a new-build three-bedroom house in Kent after renting for several years. Driven by the birth of their child, they sought more space, a decision Sam, a football coach, described as "beyond worth it" despite a longer commute, allowing them to plan for the future.