In 1980, the average house cost just £19,273! If prices had remained at this level, first-time buyers would only need to use around two-thirds of their salary to afford a property. However, just over 40 years later, in 2021, house prices have risen considerably and first-time buyers are struggling more than ever to afford a home.
The average price of a house in August 2021 was £264,000. This reflected a 10.6% rise from the average cost a year before and shows just how quickly prices are going up!
As a result of the constant price inflation, first-time buyers are facing with a housing crisis. New research by London-based fintech Tembo highlights just how tough saving for a home is in 2021.
First-time buyers are delaying major life events
Despite the surge in savings during the pandemic, many first-time buyers struggled to save enough for their first home. According to Tembo, the average amount that young people saved during lockdown was just £6,183.77. Meanwhile, the average house deposit for a first home in the UK is £57,000.
Due to the hardships of lockdown, 10% of first-time buyers haven’t been able to save anything over the last year. This puts them at a significant disadvantage when it comes to getting onto the property ladder.
Most first-time buyers expect their first home to cost nine times the average UK salary. Consequently, an increasing number of young people are having to delay major life events in order to afford a home.
Tembo’s research revealed that one in five first-time buyers have delayed having children in order to save. In total, 28% of first-time buyers have delayed a major life event of financial decision because they want to own a home.
What are the main barriers to saving?
More than 14% of first-time buyers have no savings and less than 7% have enough to afford a 10% deposit on a £200,000 house. The main barriers to saving money that young people face are student loan repayments, rent payments, bills and groceries.
Gender pay gaps are also causing problems for many first-time buyers. The barriers to saving for a deposit reportedly affect women more than men, with 56% of women saying that rent is their main problem compared to just 42% of men. Women also saved 35% less during the pandemic than their male counterparts. Men managed to stack up an average of £7,679.67 while women saved just £5,038.41.
Will house prices keep going up?
The bad news for first-time buyers is that house prices aren’t expected to drop anytime soon. In fact, the Office for Budget Responsibility has predicted that by 2023, housing prices will have risen by 13% in three years. This prediction comes after house prices in 2021 rose much faster than expected.
House prices are on the rise for a number of reasons. The coronavirus pandemic has put a strain on the number of houses available for first-time buyers. This has caused a ‘race for space’ which has led to soaring prices.
Even before the pandemic, a shortage of homes resulted in huge price inflation that shows no sign of stopping anytime soon.
The high price of housing in the UK could mean the young people will be forced to continue to rent long-term, instead of taking that first step onto the property ladder.
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