In the year 2000, you would have needed a £7,600 deposit for your first house. But in the last 17 years, that figure has risen dramatically.
According to Which?, in 2017, the absolute minimum deposit for a house in the UK is 5%. In theory;
- for a £150,000 house, you would need a £7,500 deposit,
- and for a house worth £300,000, you would need at least £15,000.
But that’s the absolute minimum across the board – which turns out to be a mile away from the reality. A survey conducted by Which? in 2015 suggested that on average, a first time buyers’ deposit was between 10-17%.
Brand new research offers an updated figure
We believe it’s safe to say that the UK housing market has become more exclusive since the turn of the millennium. Thanks to stagnant wage growth and a demand unmatched by supply, young professionals, in particular, may find themselves locked out by unreasonable entry requirements.
To support this, brand new research conducted by Hatched highlights the extent to which the average first time buyer has changed in age, salary and the deposit they need since the year 2000.
The research was inspired by PwC’s prediction that London will shift towards a city of renters by 2025, with only 40% of residents owning their own homes.
2017: Average age, savings and salary
According to Hatched, the average amount of savings needed for first time buyers in 2017 is £22,689. Assuming average house prices are £171,870, this equates to a deposit of 13.2%.
Though this figure seems to have lowered since the 2015 survey conducted by Which?, Hatched’s research still highlights a 198% jump since 2000.
The average age of a first time buyer in the UK in 2017 is 25-35, and the average first time buyers’ salary is £35,000.
2000: What’s changed?
The number of first time buyers who are married has risen by 17% since 2000. Likewise, while the age range has widened, its upper bracket has stretched by 4 years.
The number of first homes bought across the UK has dropped by 27.6%, from 464,000 in 2000 to 335,750 in 2016.
Most affordable areas for first time buyers
According to Hatched*, the top ten most affordable areas for first time buyers are concentrated in the North West, Scotland, South Wales and North East.
London is off the chart
According to Hatched, London is home to some of the least affordable areas available, with house prices costing over 10 times the average salary.
David Martin, Chief Operating Officer at Hatched
As mentioned, young professionals may find themselves locked out of the UK housing market. According to David Martin, Chief Operating Officer at hatched, these barriers typically include “property availability and suitability, lending and help to buy and of course the overall price aspect.” *
“The younger generations (particularly millennials) are especially being hit by these barriers, and are either having to stay at home with parents for longer or find themselves falling into ‘generation rent’.”
The buy to let bypass
Three years ago, reports surfaced of first time homebuyers attempting to use buy to let mortgages to “claw their way onto the property ladder.” In pretending they planned to let the property, they hoped to bypass strict homeowner requirements.
Writing for the Telegraph, Nicole Blackmore explained, “Affordability requirements for investment properties are more lax, with lenders looking at whether the rental income will cover the mortgage repayments rather than relying on a borrower’s earned income. It is also far easier to get a cheaper interest-only loan for a buy-to-let property.”
Poor renting conditions and soaring property prices are creating a housing-crisis limbo, where young professionals, in particular, may find themselves stuck between a rock and a hard place.
In an 18-month investigation, Resolution Foundation found that, “While young people are spending more of their disposable income on rent and finding it harder to save for a deposit, baby boomers are the most likely to be landlords and benefit from the strong rental market.”
*Some data in this article was part of a research report received directly from Hatched
By Jenna Kamal