426,000 first-time buyers ‘missing from England’s housing market by 2027’

As many as 426,000 fewer first-time buyers in England could get on the property ladder between this year and 2027 compared with the long-term average, a building society predicts.

Leeds Building Society, in partnership with specialist advisers WPI Strategy, analysed first-time buyer affordability between 1982 and 2022, and how the challenges of buying a first home have changed.

Economic data was used to model what the future could hold.

The report made projections for the number of first-time buyers in England in the years from 2023 to 2027 and compared this with the average number of people getting on the property ladder over the 40 years between 1982 and 2022.

Cumulatively, over the five-year forecast period, and when set against a 40-year average of 340,000 first-time buyer transactions, 426,000 fewer first-time buyers will be able to join the housing ladder at the current trajectory, without intervention, the report predicted.

We need to develop a long-term plan before things get even worse: building more homes of all types, increasing affordable routes to home ownership and supporting people to save for their deposit

Richard Fearon, Leeds Building Society

There have recently been signs of house prices falling back, and the report forecasts a gradual improvement for first-time buyers in England from 2023 until 2027.

But it said mortgage interest rates for first-time buyers are forecast to fall only slowly and the cash deposits typically required will remain relatively high.

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Richard Fearon, chief executive of Leeds Building Society, said previously low interest rates “have papered over the cracks in the housing market”.

He added: “It has masked a growing gap between people with the ability, or family help, to build ever higher deposits and stretch their repayments and those who cannot.”

With the Bank of England base rate increasing 14 times to 5.25%, 2023 is a “crunch year” for first-time buyers, Leeds said.

The society said it believes 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.

Mr Fearon added: “We need to develop a long-term plan before things get even worse: building more homes of all types, increasing affordable routes to home ownership and supporting people to save for their deposit.”

The report was released as separate research from property website Zoopla indicated that, across the UK, sellers are shaving just over £12,000 off their original asking prices on average to achieve a sale.

The average discount for a newly agreed sale, compared with the original asking price, now stands at 4.2% or £12,125, the website said.

The share of buyer demand by property type and size is “virtually the same” as a year ago, with many buyers holding out for either a fall in house prices or mortgage rates, or both, Zoopla added.

A Department for Levelling Up, Housing and Communities spokesperson said: “Supporting aspiring homeowners is a Government priority and over 860,000 first-time buyers have been helped into home ownership since spring 2010, through Government-backed schemes such as Help to Buy.

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“We know building more affordable homes is key, which is why we are investing £11.5 billion to build the affordable, quality homes this country needs.

“This has seen us achieve the highest year on record for affordable housing delivery, with a 17% increase in starts compared to previous years. Our long-term plan for housing will allow us to go further and help even more people into home ownership.”

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