A building society’s report has underlined the challenges facing first-time buyers in the residential property market, with only 1 in 8 able to afford an average priced property in the area they live.
Launching today, The Skipton Group Home Affordability Index reveals the stark reality of securing a home in Great Britain today. Combining data on the affordability of purchasing a property, with the affordability of running one into a single metric, this unique approach provides a crucial new perspective on accessing and moving up the housing market.
The report concludes that urgent action required is required to tackle the affordability challenge facing renters and first-time buyers.
- Only 1 in 8 potential first-time buyers in Great Britain can purchase the average first-time buyer property in their area, based on their own financial situation. This falls to just 1 in 100 for those earning £22,850/yr or less.
- Almost 80% of potential first-time buyers have insufficient savings for the deposit needed to get onto the property ladder in their area.
- Nearly 4 in 10 renters are spending 45% or more of their income on essential housing costs, creating a major barrier to saving for a deposit.
- The West Midlands, London and Wales, identified as the least affordable areas for first-time buyers in Great Britain.
Affordability
The Index, created in partnership with Oxford Economics, utilises data from across Skipton Group businesses, the Office for National Statistics, the Bank of England and third-party external sources to provide fresh insight on the affordability challenges faced by renters, first-time buyers and homeowners by age, income, geography and family-type.
Key findings from the Index launched today show:
- Even among those earning over £71,250/yr, only 44% can afford to buy their first home in their local area.
- First-time buyers’ affordability levels are worst in the West Midlands (driven by a combination of low deposit levels and moderate house prices), London (due predominantly to the high levels of house prices) and Wales (where lower income levels reduce households’ buying potential).
- In contrast, first-time buyers face the best prospects in Scotland (driven by lower house prices) and the East of England (due to above-average income to house price ratios).
Despite improving during the pandemic, overall housing affordability has fallen over the course of the cost-of-living crisis and despite its recent recovery sits almost exactly where it was at the beginning of 2020, with limited signs of improvement on the horizon.
Skipton Group CEO, Stuart Haire, said: “Being able to have somewhere to call home is widely recognised as one of the most important issues facing millions of people up and down the country. But to fully understand the problem, we felt we needed to move beyond the examination of house prices, income, and rent to a deeper understanding of what is driving overall housing affordability. That’s why we created the Home Affordability Index.
“For some, our findings paint a bleak picture, notably for first-time buyers. The combination of high housing costs, insufficient savings, and significant regional disparities underscores the urgent need for collaborative and targeted interventions to support aspiring homeowners.
“The scale of challenge of housing affordability is so great that no one person can lead that charge, so we are calling on the government to work cross department, cross Whitehall, cross sector and cross industry, so that together we can really start to solve an issue that impacts so many people. We stand ready to be part of those efforts”.
Challenges
Alex Stewart, Associate Director, Oxford Economics, said: “The Skipton Group Home Affordability Index highlights the challenges faced by households across Great Britain. It combines data on the affordability of purchasing and running a property to provide a comprehensive picture of housing affordability.
“The economic shocks of the last four years have led to fluctuations in the Index, but our analysis shows that housing affordability today is broadly unchanged compared to the start of this decade.
“For those who want to explore affordability in their area, Skipton’s interactive tool brings the challenge to life, allowing first-time buyers and existing homeowners the chance to see where they might be able to afford.”
Skipton is bringing the Index to life through an interactive online tool that enables users to explore living affordability and buying affordability across Great Britain for different types of households across age, income, region and family-type. Skipton is also launching a new first-time buyer support package designed specifically to help alleviate some of the challenges the Index has identified.
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