When many of us picture a first time buyer, we think of a young fresh faced singleton, fresh out of university, into their first job and preparing for ‘adult’ life. Times have changed. First time buyers are no longer 20 somethings with expendable income and carefree living arrangements. People are getting on the property ladder later in life but often still need support from the ‘Bank of Mum and Dad’. This means a few things when it comes to property. First time buyers are now often in couples or already have a family of their own. This typically means that they need more space and if possible outside areas. The need varies depending on whether first time buyers are seeking an urban or suburban solution.
Xennials and Millenials
The new first time buyer is typically either in the Xennial or Millenial demographic group. Over the past 20 years, the average age of a first time buyer has increased from 30 to 33. There has been a drop off of younger first time buyers and an increase in older first time buyers therefore increasing the average age. As at 2016, the majority of first time buyers were age 25 – 34, the same as 10 years prior, however 16 – 24 year old home owners decreased from one in 3 in 1981 to one in 10 in 2016, while there was an increase of 9% of first time buyers in the 35 – 44 years age bracket. Of the younger age bracket of 16 – 24 year olds, the proportion of renters in younger age groups has increased by 14% in the last 10 years.
Couples and Families
In recent years there has been a shift from single home owners to couples owning a home. Combining a dual income is the only way a number of people can afford to get on the property ladder in today’s market. Approximately 80% of first time buyers are now couples, compared to 62% in 2006. That’s a growth of almost 20% over the course of 15 years. There has also been an increase among first time buyers of those with dependent children now equating to 30% of first time buyers. This also changes the sort of property that first time buyers are looking for, with couples and families outside of urban areas typically looking for houses rather than flats. In the past few years, single person first time buyers have more than halved now comprising just 14% of the first time buyer market.
House Prices to Salary
Compared to 10 years ago, salaries as a percentage of house prices have reduced. In fundamentals salary increases are not keeping pace with house price increases therefore making buying a home equivalently more expensive. In 1999, one year’s average salary was equivalent to about 23% of a house, but by 2017, it was equivalent to just 11%.
This change has meant that first time buyers typically need to save a larger deposit to be able to afford a mortgage or rely on the ‘bank of mum and dad’.
In order to buy a home, first time buyers need to have a household income significantly over the national median annual income. In 2014/15, first time buyers had a median household income of £43,000 (£51,000 mean), much higher than the median annual household income of £27,000 (£35,000 mean).
Regional Affordability Differentiation
Within the UK, there are significant differences in different regions and urban centers in affordability of housing. According to the ONS, prospective first-time home buyers in London in 2017 could expect to spend 13 times their earnings on property, compared with 5.5 times in the North East. To some extent the regional house price differences map to salary differences across the country, but not entirely.
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