Buy To Let remains strong investment as first time buyers under the cosh

Despite the well publicised problems hitting buy to let investment, demand looks set to stay strong as first time buyers struggle with affordability.

A new survey illustrates this, saying a typical FTBs today must pay almost three times the amount their parents did to get on the property ladder just a generation ago.

Today’s average FTB is 33 with parents aged around 62.

In the 1990s, the estimated average UK house price was £60,551. Allowing for inflation, this is equivalent to £119,189 today. Meanwhile, the average annual salary in the 90s was £15,034, or £29,593 today. once adjusted for inflation.

This means that the price of a home in the 90s was four-times the average salary - giving an affordability ratio of 4.0.

Over the decades, 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 the 2020s, an average house price of £280,660 and an average annual salary of £34,637 means that the price of a home is 8.1 times the average earnings - more than double compared to the 1990s.

Further analysis shows that in 1995, when the parents of today’s average first-time buyer came to buy their first home, it will have cost them £38,806 (the average for a FTB property then) - 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 actually sits at £223,554, requiring a deposit of £33,533.

Therefore, first-time buyers today are having to pay 191% more than their parents did in 1995 even after adjusting for inflation.

A spokesperson for My Home Move Conveyancing, which commissioned the study, says: “Today first-time buyers are facing a significant struggle as house prices have boomed to record highs in recent years, while earnings have struggled to keep pace.

“Add to this the initial barrier of a higher mortgage deposit, the new norm of significantly higher mortgage rates and often tighter criteria from lenders and it’s a very tough time indeed when it comes to buying your first home.

“For many, it’s a task that’s only achievable with the help of the bank of Mum and Dad or loved ones and there’s certainly no shame in that given today’s first-time buyers are paying 191% more than their parents did.”