The society’s Home Affordability Index, created with Oxford Economics, shows how under-25s have been forced out of homeownership and forced to wait until later in life to find secure housing.
However, Stuart Haire, Skipton Building Society’s CEO, said an expected rise in first-time buyer affordability by the end of 2028 will lead to 125,000 extra young households being able to buy a home.
“It’s encouraging to see early signs that affordability may be starting to improve, and the focus has to be on realising those gains and ensuring more people can realistically share in them,” he noted.
Lost opportunities
The index, which covers data from the 1990s to today, shows how the average age of a first-time buyer has risen from 29 to 34. This has been driven by a collapse in the number of under-25s buying their first homes. In the mid-1990s, almost a quarter of houses were bought by someone under 25; today, it is one in 15.
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The collapse is due to rising house prices compared with wages, as well as the difficulties that young people are having in amassing deposits to buy a home.
Over half of recent first-time buyers (52%) now need two or more full-time incomes just to buy, whereas in the 1990s, only 40% needed this. Around a third now also receive help from family, and over half (54%) of those with mortgages are stretching repayments across 30 years or more.
The average first-time buyer now needs to save more than a full year of their household’s combined income to buy their first home, because deposits have risen faster than wages.
“The aspiration of homeownership has been pushed further out of reach for many younger adults, delaying independence and stability,” Haire added.
Changing demographics
A lack of affordability has led to more families delaying having children or having families in rental accommodation.
The study shows that the proportion of first-time buyers with children has fallen sharply, from around a third to just over a quarter over just 10 years.
However, when people do buy, they are buying bigger, higher-quality homes, often bypassing smaller first-step properties.
First-time buyers are also more likely to purchase houses rather than flats. The average size of first homes has increased slightly, and nearly 90% now meet the Decent Homes Standard.
Londoners are the most likely to still buy small flats, but their first homes are more likely to be energy-efficient and high-quality.
Hope on the horizon
Thanks to rising wages and a slower pace of house price growth, the index forecasts that first-time buyer affordability will improve from 12.1% in 2025 to 14.4% by end of 2028 – meaning that roughly 125,000 more first-time buyers could be able to enter the market.
Even this improvement is at risk, though, thanks to rises in living costs that will be exacerbated by the war in the Middle East.
Around 40% of potential first-time buyers are still expected to face unaffordable essential housing costs over the coming years, and increased global uncertainty could make this worse.
