Up to 426,000 first-time buyers will be “priced-out” of the UK housing market between 2023 and 2027, a report from Leeds Building Society has revealed.
In its report, A Place to Call Home, the building society stated it expects fewer first-time buyers every year than the 315,000 first-time buyer transactions in England in 2022.
It explained that, cumulatively, over the five-year forecast period - and when set against the 40-year average of 340,000 - 426,000 fewer first-time buyers will be able to join the housing ladder at the current trajectory.
In partnership with WPI Strategy, the building society analysed first-time buyer affordability between 1982 and 2022, and how the challenges of buying a first home within the UK housing market.
The report found that, between 1982 and 2022, the multiple barriers facing first-time buyers continued to make it difficult to get on the housing ladder.
One such barrier was house prices paid by first-time buyers being 16 times higher in 2022 than in 1982, while first-time buyer gross earnings were only seven times higher.
This means that the house price to earnings ratio for this group has more than doubled, from two times earnings to almost 5 times earnings.
Additionally, average deposit requirements were found to have risen from 25.5 per cent of average first-time buyer earnings in 1982 to 115 per cent in 2022.
The report also found that mortgage repayments, due to rising interest rates and saving for a deposit, are taking up a greater share of earnings, even though the earnings are higher than in 2022.
This means those able to buy a first home are typically more affluent and will need higher incomes than ever before.
Leeds additionally stated that it is getting harder to become a first-time buyer without help towards a deposit or the ability to live rent-free, leading to the gentrification of first-time buyers.
Leeds Building Society CEO, Richard Fearon, commented: “More than a decade of low interest rates have papered over the cracks in the housing market.
“It has masked a growing gap between people with the ability, or family help, to build ever higher deposits and scratch their repayments and those who cannot.
“If left unaddressed the gap will become a chasm - in the next five years, the number of aspiring homeowners priced out of the market could be enough to fill a city bigger than Coventry."
He added that this risks creating a “lost generation” of first-time buyers.
Fearon stated that “we need to develop a long-term plan before things get even worse”, including building more homes of all types, increasing affordable routes to home ownership and supporting people to save for their deposit.
As well as analysis from the building society and WPI Strategy, economic data, including Office for Budget Responsibility and Treasury forecasts, was also used in the report's modelling.
tom.dunstan@ft.com
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