Who is the average first time buyer?

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After years of "Generation Rent", falling house prices and historically low interest rates are finally helping more first-time buyers onto the property ladder. This article looks at how the profile of the first-time buyer has changed in last decade-and-a-half, and asks if the new trend will last.

The average first-time buyer in the year 2000

Seventeen years ago, the profile of the average first time buyer suggests that many more young, single people were buying their first homes, and with a much lower deposit:

  • Age: 31
  • Married: 63%
  • Has young children: 20%
  • Deposit: £7,600

In 2000, the average first-timer's property purchase was a two bedroom home, priced at £76,000.

The first-time buyer in 2017

The average buyer has changed significantly in 17 years. They are likely to be older, and married with children. Despite the return of 5% deposits as the wake of the 2008 crisis dissipates, average deposits are much higher:

  • Age: 25-35
  • Married: 80% (+27%)
  • Has young children: 49% (+105%)
  • Deposit: £22,689 (+199%)

According to recent data, the average price of a two bedroom home purchased by a first-time buyer is £171,870. Although this represents a significant 126% increase since 2000, the average deposit as a percentage of the total value of the property has also gone up.

In 2000, the average deposit a buyer had to find to purchase their first home was 10% of house's value. In 2017, average buyers must get together a 13% deposit.

Is it harder to buy in 2017?

Perhaps the most significant change between 2000 and today is a fall in the total number of first time buyers, from 464,000 to 335,750 (recorded for 2016).

Generation Rent

Partly the drop can be accounted for by skyrocketing prices in desirable parts of the UK, encouraging many younger residents to abandon the dream of home ownership, hence "Generation Rent". In London, it is anticipated that 60% of residents will be renting by 2025.

Fewer homes on the market

Fuelled by, and fuelling, higher property prices, however, is the lack of stock. New listings of property is, according to a recent survey of estate agents, at its lowest level in almost 30 years.

The UK's population has increased by around 14% since 1980, but the number of new build property entering the market per year has fallen 39% since 1980.

A lack of available properties in many areas is forcing many young people to rent with flatmates, or stay living with parents for longer.

The rental trap

As average prices increase, required % deposits get ever larger, and average salaries remain somewhat static, many would-be first-time buyers find themselves chasing a target that is getting further and further away. A recent study suggested that an modest-income household would need to save for 22 years to put together enough for a deposit.

As more people stay renting for longer, and property increases in value generally without more homes being built, rents are also increasing.

While rents are starting to fall again in some parts of the UK, the cost of living remains high for many, meaning that they are simply unable to save anything for a deposit.

Will the situation improve?

Despite the difficulties of putting together a deposit and of finding a property, there is evidence that prospects are improving for first-time buyers.

Better mortgage rates

Mortgage lenders are offering increasingly competitive rates, encouraging buyers to take advantage of the low base rate of interest.

The benefit of Brexit

As a result of Brexit-induced uncertainty and possible overvaluations in some parts of the UK, the rate of growth in prices has slowed. In some areas, particularly London and the South East, average property prices have actually fallen.

The Government must act

In addition, although there is little evidence of results at this point, the overwhelming pressure created by a lack of sufficient stock will encourage Government to continue to find ways to incentivise developers and planning officials to build and approve more new property.

Whether the encouraging state of affairs will continue for any length of time is dependent on factors far outside the control of home buyers. However, the vast majority of commentators agree that without massive intervention and change, the housing crisis is only going to worsen.

The profile of the first-time buyer may continue to change, but it seems virtually certain that the overall number of new buyers will continue to diminish, and that the impact of this trend on the rest of the housing market will continue to grow.

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Gaynor Haliday, Legal researcher

Gaynor Haliday, Legal researcher