First time buyer affordability at decade high

Affordability for first-time buyers (FTBs) reached its most favourable level in ten years last year, despite house price rises over the same period. New analysis from estate agents Yopa shows the average price paid for a first home in the UK has increased 63% since 2014. However, earnings growth relative to income means homes are now the most affordable since 2015.

The analysis compared average FTB house prices with average annual earnings, calculating how many years of income are needed to purchase a first home. In 2024, that figure stood at 7.1 years, based on an average annual income of £31,717 and an average FTB property price of £226,744.

The 2024 affordability ratio matches the level last seen in 2015. The ratio peaked at 8.0 in both 2021 and 2022, before easing to 7.3 in 2023. The improvement is largely the result of stronger wage growth. Average annual earnings rose 6.2% in 2023 and a further 7% in 2024. At the same time, FTB house prices fell slightly in 2023 and have grown more modestly since.

Significant regional disparities

London remains the least affordable region for FTBs, with an income-to-house price ratio of 12.4. This means buyers in the capital require more than 12 times the average local income to buy their first home.

The South East, East of England and South West were all above the national average, with affordability ratios of 8.9, 8.5 and 8.4, respectively. At the other end of the spectrum, the average first home in Scotland costs 4.8 times the average annual income, making it significantly more affordable than the rest of the UK.

Challenges remain despite improving trends

Yopa Chief Executive Verona Frankish said affordability remains a major concern for prospective buyers, “It’s fair to say that getting that first foot on the ladder has been no easy task at any point over the last decade and, now that the Help to Buy scheme has ended, it’s perhaps tougher than ever in some respects.”

However, rising earnings in recent years have improved the overall picture. Frankish added, “The silver lining for today’s first-time buyers is that whilst the average price of a first home has increased substantially over the last 10 years, earnings growth has also improved considerably in the last three to four years.”

Affordability still challenging

While the improving affordability ratio may encourage prospective buyers, a ratio of 7.1 still implies a considerable stretch for many households and affordability in high-demand regions remains a significant barrier. Nevertheless, with wage growth outpacing house price inflation, there are signs that conditions may be slowly becoming more favourable for those entering the housing market.

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Source: https://www.propertyreporter.co.uk/first-time-buyer-affordability-at-10-year-high.html