How Are First Time Buyers Faring Today?
First time buyers looking to get a foot onto the property ladder have long been one of the groups hit hardest by the lack of affordable homes coming onto the market. The lack of housing keeps on pushing up prices beyond their means. And it increases demand within the rental sector and pushes up rental prices, hitting those looking to save for their first home all over again.
It’s hard to put money away to buy a home when paying the rent takes up so much cash. It seems that many first time buyers are caught in a position where they must run twice as fast as other simply to stand still.
The First Time Buyer Tracker was set up by the estate agents Your Move and Reed Rains to keep tabs on market movements and sentiment amongst first time buyers. During May of this year the Tracker showed that the level of sales completions for first time buyers had reached their lowest level for 3 years. There were only 22,000 completions made in the month, a drop of 18 per cent compared to the same month in 2014.
That drop may in part be the effect of the election and uncertainty surrounding its result. However, it’s also clear that the deposits required by prospective buyers are rising at a rapid rate and forcing buyers to reconsider their purchases.
The average deposit for a first time purchase during May was £25,134. That represents a rise of 4.2 per cent against the deposit required in May 2014, and a rise of 1.7 per cent on a monthly basis. More pertinently the figure of £25,134 represents 64.4 per cent of the average yearly salary of a first time buyer. That’s how tough the market is today for those looking to purchase their first home.
Of course, the fundamental problem is the imbalance between supply and demand within the market. Not enough new homes are becoming available to meet requirements. And this imbalance is particularly acute for homes at the lower end of the market typically favoured by first time buyers. Rightmove reported in June that they saw one quarter more enquiries about homes with up to 2 bedrooms and smaller, compared with larger properties.
Until that imbalance is rectified with more homes being built then first time buyers will remain squeezed. The toughest place in the UK for first time buyers is, unsurprisingly, London. The cheapest home in Kensington and Chelsea is 30 times the average salary of those in the bottom quarter of incomes according to the National Housing Federation. In Westminster the cheapest houses are 24.4 times the same income.