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Decade trend gives hope to first-time buyers

Updated 06 December 2022

3min read

Nick Green
Financial Journalist

The 2010s saw the slowest house-price growth since the 90s, according to the Decades Report by Nationwide. With interest rates still low, this means a first home is now more affordable than many believe. Article by Nick Green.

Hope for first-time buyers

From 2010 to 2019 the price of the average house in the UK rose by 33 per cent, significantly down on the 117 per cent growth of the previous decade. With property values stagnating in many parts of the country, and continued low interest rates, the picture for first-time buyers is far from gloomy as the UK enters the 2020s.

This is very much the view of property consultant Kate Faulkner, who believes that doom-mongering in the media has convinced many young people that they will never afford to own a home – when in fact they can. Criticising the national press and big data firms, Kate says, ‘Why is the industry not focusing on how to afford a property in their local area, and why is everyone continuing to tell people it’s "impossible" to buy?’

Referring to Nationwide’s House Price Index report, Kate points out that although house prices have risen across the UK, in many areas they have been outstripped by wage growth, meaning that a home in those regions may now be more affordable than it was 13 years ago. These zones of increasing affordability include Scotland, Northern Ireland, Wales, the NE, West and Yorkshire.

Kate continues, ‘The Nationwide HPI report shows that affordability-wise, in the last quarter of 2007, mortgage payments took up 40 per cent of first-time buyers’ pay in the North East. Now it’s just 19 per cent. Even in London, it’s fallen from 69 per cent to 56 per cent – of course, still incredibly tough – but when you look around the rest of the UK, the idea that affordability is still the issue it was before the credit crunch is nuts.’

Robert Gardner, Nationwide's Chief Economist, pointed out that the number of first-time buyers in the market is currently high. He said, ‘First-time buyer numbers have continued their steady recovery, reaching 354,400 in the twelve months to October – this is more than double the 155,000 recorded in 2009 and 12 per cent below the 2006 peak.’

However, Rightmove reported 15 per cent fewer new sellers than in the same period a year ago, and Home.co.uk claimed a fall of 10 per cent in new sales instructions. This could be ominous for first-time buyers, as the supply of available properties may dwindle.

Mortgages more affordable – but deposits still a challenge

Looking at the long-term picture revealed in Nationwide’s Decades Report, it’s clear that the 2010s were a ‘slump decade’ for the property market. The notorious 80s boom saw growth of 180 per cent, and in the Noughties house prices rose 117 per cent, with stagnant years either side. But whereas the 1990s (the lowest-growth decade at 21 per cent) saw painfully high interest rates, the 2010s delivered historic lows, which for now are continuing. This suggests that conditions for homebuyers – though far from ideal – are probably as good as we are likely to see in the short term.

For the UK in general, the ‘house price ratio’ (the ratio of average home prices to average earnings) has continued to rise. For first-time buyers it now stands at 5 (the record high, in 2007, was 5.4), up from 4.4 a decade ago – while in London it is around 9. Nevertheless, mortgage affordability has improved in recent years, with the cost of monthly repayments being a smaller share of take-home pay than it was it 2009.

The biggest challenge for first-time buyers, therefore, is to save up a large enough deposit to secure a mortgage deal in the first place. The Nationwide report estimates the time taken to save a deposit in various regions, based on the average local income and house price. These figures may make for gloomy reading: the average time is eight to nine years, while in London the goal is a seemingly unattainable 15 years for those on a typical London wage. Ten years ago it only took 10 years, so the target is moving further out of reach.

Buyers can succeed by aiming at lower deposits

The Nationwide statistics on home deposits do miss a crucial point, however. They assume a 20 per cent deposit – which is desirable, but by no means necessary. The average UK deposit is 16 per cent, while a 15 per cent deposit is usually enough to secure all but the very best deals (new deals tend to be offered at each 5 per cent threshold). Smaller deposits may also be far more acceptable in the lower-priced regions, according to Kate Faulkner.

If aiming at a 15 per cent deposit, saving a deposit in just six years become an achievable goal – especially for someone living with parents, or buying as part of a couple. It is also possible for people to buy property together even if not romantically involved, by buying as tenants in common.

It’s clear that first-time buyers are out there, and as anxious to get on the property ladder as ever. These latest figures show the scale of the challenge they face – but do also offer a ray of hope.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.