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First time buyer affordability study UK

First-Time Buyer Changes

How Has Housing Affordability for First-Time Buyers Changed in the UK?

Getting on the property ladder has never been harder, with house prices in the UK increasing at an incredible rate over the last twenty years. When we take into account changes in earnings, how far has this hit first-time buyers? Which parts of the country have become harder to purchase your first property in?

To find out more, our estate agents calculated how much you would need to be able to afford a 10% deposit around the country, how much this is as a percentage of average annual income, and how this has changed over the last 20 years.

How Has Housing Affordability Changed in the UK?

First time buyer changes UK data

In 1999, the average house price in the UK was just £77,961. Fast forward twenty years and that figure has almost trebled to £230,735.

At the same time, the average income has also increased, but only from £17,803 a year to £30,353 – an increase of 70%.

This means that while in 1999, a 10% deposit would have worked out at about 43.8% of your annual salary, these days, that figure has risen by about three quarters to 76%, showcasing just how much harder it has become for first-time buyers to get their foot on the property ladder.

How Have House Prices Changed Around the UK?

Regional house prices

While it’s clear that it is more difficult to buy your first home than it was twenty years ago, how does this vary around the UK?

It’s perhaps not surprising to see that the biggest shift has occurred in London, where average house prices have increased at an extraordinary rate of 307%, from £115,686 to £471,311. Prices have also risen more sharply in other southern regions, such as the South East and East of England.

How Have Average Earnings Changed Around the UK?

Regional earnings in the UK

Although earnings have also increased during this time, they haven’t risen at the same pace as house prices.

For example, in London, where house prices have quadrupled, the median salary has only increased by about three quarters, from £22,487 to £38,992. Change in income has been relatively similar around the UK, despite that the change in the cost of housing looks very different around the country.

How Has the Amount Needed for a Deposit Changed Around the UK?

Regional change of deposits needed in UK

Regional deposits as a percentage of earnings

This all means that the average amount needed for a 10% deposit has shot from 51.4% of a Londoner’s average salary to 120.9% in the space of the last twenty years.

In other parts of the UK, the change hasn’t been quite as large. In Northern Ireland, for example, the average house price was around £62,048 in 1999, rising to £138,121 in 2019. While that’s a considerable rise, it pales in comparison to those in London and the rest of the South, with the percentage of your salary needed for a 10% deposit rising from just 39.3% to 50.3%.

Methodology

House prices sourced from the Land Registry’s UK House Price Index, taking an average for each calendar year.

Average deposit amount calculated assuming the buyer is placing a deposit of 10% of the value of the property.

Median annual earnings for full-time employees taken from Table 12 of the Annual Survey of Hours and Earnings Time Series of Selected Estimates.

 

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