First-time buyer demand is up 5% since January, according to the Zoopla House Price Index.
Despite buyer demand increasing, the market share of first-time buyer sales reached its lowest level since 2016 last year, accounting for 31% of sales which was down from 35%.
Older homeowners have boosted cash purchases to almost a third (30%) of all sales, reaching a 12-year high.
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Sales agreed for properties priced between £100,000 and £150,000, a sector of the market where first-time buyers are typically more active, has risen by 26% from Q4 2020.
Looking to the wider market housing demand remains elevated, up 12.4% on this time last year.
The number of sales agreed is also up, rising 10.1% year-on-year, however the total quantity of stock is down 13.8% compared to 12 months prior.
Meanwhile, sellers are reluctant to list homes for sale while the third lockdown continues, maintaining upward pressure on prices which are up 4.3% annually.
Ahead of the Budget on 3 March, Zoopla believes there is evidence that landlords are looking to take gains ahead of possible reforms to Capital Gains Tax, as well as changing rental market dynamics.
The likelihood of an extension to the stamp duty holiday continues to rise, following reports of a potential three month extension.
Zoopla noted that while 750,000 homemovers should benefit from full or partial SDLT relief, 70,000 sales are expected to miss out due to the increased time it is taking to process transactions if the deadline remains as 31 March.
Gráinne Gilmore, head of research, Zoopla, said: “The strong bounce in demand seen at the start of the year has been further boosted by increased numbers of first-time buyers active in the market.
“Many of these buyers will be taking advantage of the increased number of home loans now available for purchasers with smaller deposits, and most will be less concerned about the ending of the stamp duty holiday on 31 March.
“First-time buyers have no property to sell, so their increased activity in the market is further pushing up buyer demand ahead of supply.
“As the growth in demand continues to outstrip the supply of homes, it puts more upwards pressure on prices.
“We can see this in the 4.3% average price growth in the year to January, matching the highest level of growth seen in nearly four years.
“One area of the market where there is more supply coming to the market is among landlords who are bringing their investment properties forward for sale.
“The share of homes listed for sale which were previously rented has risen in nearly every region during 2020, as landlords reassess their portfolios in light of current rental trends, or ahead of possible tax changes for investment property.
“While the homes for sale account for a very small proportion (less than 1%) of rented stock, it is a noticeable trend emerging in the market.”