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Homes becoming unaffordable for FTBs

Homes becoming unaffordable for FTBs

Category: Mortgages

Updated: 29/04/2016
First Published: 29/04/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

While house price rises may be welcome for owners looking to build equity in their home, there's one kind of buyer for whom it definitely won't be – first-time buyers. Indeed, house prices are becoming increasingly unaffordable for this sector of the market, with research from Post Office Mortgages finding that more than a third of homes sold last year were in areas completely out of reach for new buyers.

Unaffordable aspirations

The figures show that 36% of all properties sold last year were in areas where the average home is unaffordable for those looking to take their first step on the property ladder, an occurrence driven by soaring house prices across the country – with many areas now being off-limits to wannabe homeowners.

It's a growing trend, too, and with the average house price having risen by 306% in the last 20 years, it's little wonder. By comparison, the average first-time buyer's (FTB's) income has increased by a lesser 159% over the same period, which means that a typical property is now worth more than five times the average FTB income.

There's clear variation across the country, too. Brighton, for example, was found to be one of the most unaffordable cities in the study: homes in this area have increased in value by 463% over the past 20 years and now stand at an average of £305,149, leaving homes in just 9% of the city's neighbourhoods within the average first-time buyer's budget.

At the other end of the scale, homes in Southampton appear to be relatively affordable, with average house prices at an average of £183,443 and 94% of neighbourhoods still within the typical FTB's reach.

The art of compromise

Given the difficulty many FTBs face in getting on the ladder, it seems that many are willing to compromise in order to take that first step, with 87% of those who bought their first home in the last year admitting they were forced to lower their expectations. This is compared with the 29% who had to compromise when they bought more than 20 years ago, highlighting the extent to which aspirations have had to be tempered.

These compromises include looking further afield for a new home, with 24% of new buyers having moved further away from local transport links than they'd planned, while 18% had to sacrifice living close to good schools. Others are changing their view of the features their first property has to contain, with gardens (for example) falling as a 'must-have' from 41% pre-1995 to 13% of those buying in the last year.

John Willcock, head of Mortgages at Post Office Money, said that the figures "highlight the challenges facing today's first-time buyers", with many cities becoming "unaffordable blackspots" for those looking to buy.

"Average property prices have gone far beyond the typical budget… Many would-be buyers are having to compromise on their housing needs in order to take that all-important first step onto the ladder," he said. "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. The earlier people start to plan and save for the future, the closer their housing reality is likely to be to their goal."

Make your dream a reality

Homes may be becoming unaffordable in some areas, but there are others where prices hopefully won't be too prohibitive – but either way, the key is to build as big a deposit as possible. Start by finding the right savings account to grow your fund, and remember to compare first-time buyer mortgages so you know the kind of repayments you'll have to contend with. Then, if you pick the right area and are perhaps willing to compromise, your new home could be more affordable than you think.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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