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I don’t think it’s landlords that have been increasing purchase prices of late.
If their absence slows down or reduces house prices, that’s might be good news for first time buyers only.
The current homeowners who might see their house prices slashed, and former first time buyers who bought new builds in the past couple of years who will soon be in negative equity might not be so thrilled.
Acliff-
I don’t think it’s landlords that have been increasing purchase prices of late.
They represent about 10–15% of purchases every year, so if you believe that additional demand pushes up prices, then the counterfactual where they are removed from the demand pool would lead directly to reduced prices. There are other factors adding to the asset value of housing, but it's not as if you can dismiss it as at least one of the causes.
If their absence slows down or reduces house prices, that’s might be good news for first time buyers only.
It's mostly irrelevant for people who only own their own home. Since there's a general movement up/down, the place they move to will have changed price in the same direction as the one they've moved from. It also helps anyone sizing up, since the gap between bands is proportionally smaller.
The current homeowners who might see their house prices slashed, and former first time buyers who bought new builds in the past couple of years who will soon be in negative equity might not be so thrilled.
It would be between 1–5% of owner occupiers (depending on age, see below) who would go into negative equity if prices reduce by 9%, which would be the largest fall since 2008. Not great for those people, I'll grant you that, but the fixes are relatively easy — target a nominal housing inflation figure of between around -2% and 0%.
slippers
We should hopefully see reduced purchase prices over time from a lower level of demand from landlords. Many renters are actually in a position to buy, and the number of first-time buyers has increased in the last year or two, so a switch of tenure does seem feasible if the conditions are right.
The limiting side of this is that when people do buy their first home, they tend to buy places with more rooms (e.g. rather than sharing with others), so marginally reducing the number of bedrooms available to rent. In any reasonable world that should be easily solved by building more dwellings, and shouldn't be any reason to allow landlords to continue pushing up values.