Study brings good news for first time buyers

First time buyers have had little to cheer about recently. Ever increasing house prices and the subsequent higher deposit requirements have made it very difficult to take that first step on to the property ladder. But things seem to be improving.

Post Office Money’s recent study* looked at property prices across 80 locations. They discovered that 56% of properties across the UK are in areas that are now affordable for first time buyers.

Blackpool tops the poll with an average house price of £110,000

Kingston upon Hull and Stoke-on-Trent come a close second with £115,000 and £116,000 respectively. Areas around Manchester are proving to be more affordable. And most surprisingly Reading, one of last year’s least affordable locations, has seen a 6% rise in the number of affordable areas.

So what’s triggered this shift?

Part of the reason may be down to an increase in housing stock and affordable home schemes in the areas. There’s also been a stagnation in property prices. They’ve only grown by 0.9% to reach an average price of £282,713, whilst the average household income has increased by 1.2%, which is £48,289.

The average home now costs £282,713 with first time buyer household income levels at £48,289.

So whilst there’s plenty to be positive about, we’re not in the grip of a buyers market just yet. After all, prices are still 5.85 times the average first time buyer’s annual salary. And affordability isn’t uniform.

Commuter hubs in the South are still some of the least affordable locations.

Prices reach an eye watering £392,500 in Oxford. However this isn’t putting people off wanting to own their first home. In fact, 65%** of people still want to take that step on to the property ladder.

69% of recent first time buyers needed financial support from loved ones to secure a deposit.

A large number of recent first time buyers said raising a deposit was their biggest challenge on the road to purchasing a home. 46% also said the affordability of monthly repayments prevented them getting on the first rung of the property ladder***.

The bank of mum and dad (or nan and grandad) hold the key.

In 2017, to help their children secure their first home, parents gave an average of £32,101 as a gift or loaned £24,347****.

The lending market is also evolving to assist first time buyers

Today we are faced with an ever increasing range of products including, No Cash Deposit, 95% LTV, guarantor and joint borrower/sole proprietor mortgages. This is providing first time buyers with more options and helping to remove some of the obstacles they face.

Sources:

* Opinium Research was briefed by Post Office Money to conduct a study into the affordability of properties for first time buyers in the UK, covering over 80 locations across the UK. The percentage of each city that is affordable to first time buyers was calculated by seeing what proportion of the middle layer super output areas (MSOA) in each local authority had a median house price lower than 4.5 times the average income of first time buyers in each region. Property price data sourced from the ONS House Price Statistics for Small Areas, quarterly statistics from the Registers of Scotland and the Northern Ireland Residential Property Price Index. Data on first time buyers’ salaries in each region sourced from the ONS House Price Index.

** Foundation Resolution “Home Improvements” - intergencommission.org. April 2018.

*** BSA Property Tracker, March 2018.

**** Post Office commissoned by Opinium Research to conduct a survey amongst 1,009 millennials and 1,021 of their parents between the 5 and 10 of October 2017. The percentage of each city that is affordable to first time buyers was calculated by seeing what proportion of the middle layer super output areas (MSOA) in each local authority had a median house price lower than 4.5 times the average income of first time buyers in each region.

Iain Smith Bank of Ireland

This article was written by
Iain Smith - Head of Intermediaries
Bank of Ireland UK Mortgages