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More than a third of homes sold last year were in areas unaffordable for first-time buyers

Press release   •   Apr 29, 2016 00:01 BST

  • More than a third (36 per cent) of all properties sold last year were in areas where the average home was unaffordable for first-time buyers
  • Average property prices equivalent to more than five times the average income of first-time buyers
  • Tale of two cities: Brighton and Southampton at different ends of the affordability spectrum despite being separated by just 70 miles

Soaring house prices have resulted in parts of the UK becoming almost completely unaffordable to first-time buyers, according to a new study from Post Office Money Mortgages.

The Priced Out report explores affordability of properties across the UK for first-time buyers, and how this has changed over the past 20 years. The study also takes a detailed look at this trend in 14 of the UK’s largest cities.

The findings reveal that a third (36 per cent) of homes in the UK – equivalent to 5.5 million properties - are now in areas where the average home is unaffordable for those looking to take their first steps on the property ladder. This is a trend that is getting worse, with hundreds of neighbourhoods falling out of reach over the past 20 years.

It is little wonder that first-time buyers are struggling to find their feet in the housing market, with the average house price increasing by 306 per cent over the past 20 years. And while the average first-time buyer’s income has also increased over this period (by 159 per cent), a typical property is now worth as much as 5.51 times as much as this.

Although London has a higher proportion of neighbourhoods where the average home is affordable to first-time buyers than some other cities, they still face the biggest leap to reach the first rung of the ladder, with the average property in the capital reaching almost half a million pounds (£498,174) – or the equivalent of 6.41 times their income.

While house prices have increased, the number of properties and areas available for prospective buyers to choose from has fallen, with Brighton the most unaffordable of cities included within the study. Homes in the city have increased in value by 463 per cent over the past 20 years and now stand at an average of £305,149, leaving homes in just nine per cent of neighbourhoods in Brighton within the average first-time buyer’s budget.

Meanwhile, Southampton, less than 70 miles further along the coast, is one of the most affordable spots for first-time buyers, where properties cost an average of £183,443.

Percentage of each city that is affordable to first time buyers-in 1995 compared with 2015

City19952015
Birmingham 96%82%
Brighton 100%9%
Bristol 95%56%
Cardiff 90%48%
Leeds 91%68%
Liverpool97%87%
London81%41%
Manchester 95%86%
Newcastle 93%76%
Norwich 100%93%
Nottingham 100%89%
Plymouth 100%84%
Sheffield97%80%
Southampton 100%94%

Commenting on the findings, John Willcock, Head of Mortgages at Post Office Money, said: “These figures highlight the challenges facing today’s first-time buyers. Cities such as Brighton are becoming unaffordable ‘blackspots’ for those looking to get on the ladder, with average property prices far beyond the typical budget. The London property market has always been more challenging for new buyers to break into, which is why many instead turned to surrounding areas within a commutable distance – which in turn are becoming increasingly unaffordable.”

The Priced out study also revealed the lengths to which first-time buyers are willing to compromise on their wants and needs to achieve their property aspirations. Almost nine in ten (87 per cent) of those who bought their first home in the last year admitted they were forced to lower their expectations in order to get on the ladder, compared with less than three in ten (29 per cent) who bought more than 20 years ago.

These compromises include looking further afield for a new home; almost a quarter (24 per cent) of first-time buyers within the past year moved further away from local transport links than they had planned, and a fifth (18 per cent) sacrificed living close to good schools – compared with 4 per cent respectively of those who bought their first home more than five years ago. Demands on properties themselves are also changing, with gardens falling as a ‘must-have’, from 41 per cent before 1995 to 13 per cent of those buying in the last year.

John Willcock continued: “Many would-be buyers are having to compromise on their housing needs in order to take that all-important first step onto the ladder. For some, this is a case of prioritising what is really essential in a home, but for others this means significant changes to their lifestyle, moving further away from work, family and friends. The earlier people start to plan and save for the future, the closer their housing reality is likely to be to their goal.

Ends

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