What can you afford? - First time buyer

First-time buyers are paying 191% more than their parents

3 min read

It is no secret that getting onto the property ladder is harder than ever. However, first-time buyers are actually now paying 191% more than their parents, after adjusting for inflation. Here we explore how property market affordability has changed since then and why it is so much harder for first-time buyer’s today.

  • Alistair Singer Digital Channel Director at My Home Move Conveyancing
    Alistair Singer

    Digital Channel Director

    Published May 20th 2024

daughter showing her mum the house she is buying

In order to understand the why the cost of buying your first home has increased, we need to compare the average age of a first-time buyer, which is 33 in 2024 to when their parents were first-time buyers, which was also 33, in 1995, to get a true reflection.

House prices have increase exponentially since the 1990’s

The average UK house price in the 1990s was £60,551 (equivalent to £119,189 once adjusted to inflation).

In 1995, this was actually lower, when the average first-time buyer would have paid £38,806 for their first home - with a 15% deposit setting them back £5,821. Even when adjusted for inflation, this is equivalent to purchasing a house in today’s market for just £76,833 having placed a deposit of £11,525. 

Today, the average price paid by a first-time buyer now sits at £223,554, requiring a deposit of £33,533 (based on a 15% deposit). Therefore, first-time buyers today are having to pay 191% more than their parents did in 1995 even after adjusting for inflation.

Earnings to house price ratio has more than doubled since the 1990’s

In the 1990’s, the average annual salary was £15,034, or £29,593 once adjusted for inflation. This means that the price of a home in the 90s (£60,551) was four-times the average salary - giving an affordability ratio of 4.0.

Since then, changes in house prices and salaries mean that properties have become less affordable. In the 2000s the affordability ratio stood at 6.4, and in the 2010s it was up to 7.1.

Now, in 2024, an average annual salary of £34,637 and average house price of £280,660 means that the price of a home is 8.1 times the average earnings – over double compared to the 1990s.

Deposits in 1990s were three times smaller than today

Another key contributor in making it harder to become a homeowner today, is the cost of the deposit, and stricter lender criteria.

As mentioned above, the average 15% deposit in the 1990’s was £5,821, which is £11,525 after adjusting for inflation.

Today, first-time buyers have to save £33,533 for a deposit, on average, three times what their parents had to. This has become increasingly more difficult for first-time buyers, with the cost-of-living crisis and the cost of rent outpacing wages by 5.2%.

To help todays first-time buyers, we’ve outlined our 5 top tips to help you save for a deposit.

This article has been featured in the Express.

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