Home owning ‘aspiration gap’ reaches new high

  • The aspiration gap among renters widens to sky-high levels, as over 93% wish to be homeowners, but just 6% expect to buy in the next 12 months
  • Comes as almost half (44%) of tenants say a lack of affordable, first-time buyer homes is the most significant problem the facing the UK
  • Despite this concern, less than a fifth (17%) of tenants are optimistic that government action can address the UK’s housing crisis
  • Completed first-time buyer transactions fall by over 15% on a three-month basis, but those who did manage to buy a first home enjoyed lower deposit and loan costs

The gap between aspiration and reality for aspiring homeowners has grown significantly in the space of three months, according to the latest First-Time Buyer Barometer from Your Move and Reeds Rains.

As of September, over nine-in-ten renters (93%) wish to own a home. However, when asked when they expect to be able to buy, well below one-in-ten (6%) said that they were expecting to buy in the next 12 months.

This gulf has widened compared to June 2015 when 91% of those currently renting expressed an aspiration to own their home, while 8% claimed they were expecting to buy in the next 12 months.

Instead, many renters are increasingly choosing to defer the dream of homeownership to the more distant future, with the majority (53%) aiming to buy within the next five years. This figure is up on June – when 48% of renters said they would buy within the next five years – and the end of last year (December), when just 36% opted for such a five year time-scale.

Alongside this, almost half of renters think the housing crisis is the biggest of any problem facing the UK. On this issue, 44% responded that a lack of housing at affordable prices is the biggest problem the UK faces, with a further 13% viewing the housing crisis as at least a problem for the whole country. This means that, in total, 57% of those currently renting believe there is a ‘crisis’ with the supply of affordable housing in the UK.

Adrian Gill, Director of estate agents Your Move and Reeds Rains, comments: “As the number of renters wishing to become homeowners keeps mounting, the lack of new and affordable homes to meet this demand is ever more apparent. Those hoping to hop on the ladder face an unappealing choice between purchasing a smaller home further from amenities and the workplace – or remaining in rented accommodation indefinitely, waiting for one-day when their take-home pay might begin to match rising property prices.

“This doesn’t mean all aspiring first-time buyers have given up, or are kicking the issue into the long-grass. Rather they’re saving the cash and scouring the property market, so they can find the place – and price – that’s right for them. Potential buyers are effectively putting their lives on hold as they wait for the supply of homes to fit their hopes.

“And there is a silver lining to this gloomy cloud. The fact that homeownership remains the aspiration of the vast majority of tenants illustrates that they still possess the optimism to get on the ladder. Moreover, as real-terms wages continue to rise, increasing numbers of renters possess the means to do gradually raise a deposit. This means the challenge has moved on, to whether earnings and savings can keep pace with accelerating house prices – rather than simply beating inflation.”

Scepticism towards government plans for the housing market

Despite the high levels of anxiety about the shortage of suitable first-time buyer properties, the majority of tenants are sceptical of the Government’s ability to take effective action to address the issue.

When asked in September how optimistic they were that the Government could do something to improve the supply of affordable, first-time buyer homes, 19% claimed to be very pessimistic, with a further 22% stating they were at least somewhat pessimistic. By contrast, only 14% of tenants said they were optimistic that government intervention in the housing market will bring any benefits – and only 3% described themselves as very optimistic. The figures mean that, in total, only 17% of tenants felt in any way positive about the Government taking action to tackle the housing crisis, with the remaining 83% remaining either ambivalent or outright cynical about such action.

Instead of relying on Government assistance to get them onto the housing ladder, first-time buyers are increasingly turning to their families for support. When the poll asked first-time buyers what financial help, if any, they had received to purchase their first home, almost half (46%) claimed that relatives had helped them with deposit costs – up from less than three-in-ten (29%) who said the same in June.

By contrast, Government schemes proved far less popular. Only 6% used the Government’s much-touted Help-to-Buy mortgage guarantee scheme – up just two percentage points on June – while less than one-in-twenty (3%) took advantage of the state-backed Help-to-Buy equity loan scheme – also up two percentage points compared to the same period.

Adrian Gill explains: “Those needing help to get onto the property ladder are increasingly favouring family fortunes over state support. Getting help from relatives when it comes to paying deposit costs or guaranteeing a mortgage can be more convenient and less time-consuming than seeking state assistance.

“That said, not everyone has a family fortune they can rely on to help them get a foot on the ladder, so Government schemes like Help-to-Buy remain a useful part of keeping the housing market accessible. The problem is that not enough first-time buyers are aware of the existence of such schemes. So, instead of creating more stimulus packages for first-time buyers, the Government should perhaps double-down on the great ones they already have – but make them better known, more widely available, and more user-friendly. That way, even those without rich relatives have the opportunity to fulfil their dreams of homeownership.”

September first-time buyer transactions drop by 15%

September saw 24,800 completed transactions – down by 15.4% on a three-month basis, since this figure stood at 29,300 in June, and dropping 9.8% on the previous month’s total (27,500 in August).

However, those who did complete transactions in September enjoyed lower overall costs than their predecessors three months ago. The average price paid by first-time buyers dipped 3.0% between June and September, falling from £159,037 to £154,317. In addition, average deposit costs fell from £26,767 in June to £25,948 in September, representing a percentage fall of 3.1%.

First-time buyers withdrew smaller mortgages in August, with the average loan size falling by 2.9% in September over a three-month period, declining from £132,270 to £128,369.

Moreover, on another optimistic note, the latest Mortgage Monitor from e.surv reveals that the total number of high LTV house purchase approvals shot up by 16% between June and September, suggesting continuing momentum in the pipeline of FTBs likely to buy in the autumn.

Adrian Gill concludes: “The number of home-buyers entering the market for the first time has taken a tumble this month. However, aspiring buyers shouldn’t start worrying – September has been a slow month in the property market for a number of years now, with the good news being that October normally marks a relative recovery.

“Those getting on the ladder this month have been determined and pragmatic enough to drive a hard bargain, securing mortgages with smaller deposits and scouring the property market hard to find the right home that’s within their budget. Let’s hope this new savviness on the part of first-time buyers isn’t just a September surprise. As demand for homeownership continues to grow and the Government dawdles on spurring the growth of new homes, first-time buyers will need to keep their wits about them so they can make the best fist of what remains a sellers’ market.”

Regional differences

In September, the highest average purchase price was paid by first-time buyers in London at £316,920, while Northern Ireland was the cheapest region for first-time buyers, with the average prices in the region standing at £86,809.

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