First-time buyers are still better off renting in the North

The plight of first-time buyers getting onto the housing ladder remains, despite a recent shift in affordability across the country.

The average age that people first buy their own home has risen over recent decades, with more people living in rented accommodation for the first years of their adult life – and beyond. 

This is down to numerous reasons, from affordability to flexibility and lifestyle choices, with many young professionals opting to rent in shared properties with friends close to work and amenities.

New data from the TwentyCi and TwentyEA Property and Homemover Report for the third quarter of 2024 has revealed the variations in affordability when it comes to renting, and has found that in every part of the country apart from the South, people are better off renting than buying. 

This is based on a range of factors, from the percentage of average income spent on rent in each location, to mortgage loan-to-value and rates, in order to determine what works out more expensive for renters vs first-time buyers.

The affordability landscape

According to the report, the landscape has changed when it comes to the ‘rent or buy’ question compared with last year. In 2023, first-time buyers were better off getting onto the property ladder rather than renting everywhere except the North East.

However, the tables have now turned, and this is partly due to mortgage goalposts changing. Last month, notes TwentyCi, Nationwide revealed that they would now lend up to six times household income for buyers taking a five- or 10-year fixed rate deal up to 95% loan to value (LTV). 

Using this figure, with the assumption that the first-time buyers have a 5% deposit with a 40-year total mortgage term at a 5% interest rate, “you are now only better off buying in the South of the country”, says the report. 

Elsewhere, it would be more affordable to rent, but this excludes the benefit of capital from owning your property (in every location apart from the North East and Northern Ireland).

The most and least affordable places to rent

The average percentage of gross income spent on rent across the UK is now 42.9%. 

The regions where rent is more affordable than this (where less of the average wage is spent on rent) are the North East (28.8%), North West (34.5%), Yorkshire and the Humber (32%), East Midlands (34%), West Midlands (34.5%), South West (41.3%).

The other UK countries – Wales (33.4%), Scotland (32.1%) and Northern Ireland (31%) – also fall below the average. 

Yet London tenants are forking out more than half of their gross income on rent, at 57.3%, making it the least affordable location to rent. In the South East it’s 44.3%, while in the East it’s 43.1%, also above the UK average.

Availability for first-time buyers

The upcoming Budget could contain some announcements geared towards first-time buyers, including potential stamp duty changes, or more help to buy-style schemes being set out.

However, many in the rental industry are also calling for the government to use measures to improve the outlook for both landlords and tenants, as the sector is crucial for thousands of households who aren’t in a position, or do not want to buy.

In TwentyCi’s report, availability for first-time buyers is also analysed. It finds that for average earners, prospective first-time buyers in the South and East of the country (excluding London) would have a lot of properties to choose from.

And in the North West, South East and South West regions, there are more than 10,000 homes available, says the report, “assuming they pick from the cheapest 20% of properties”.

It adds: “In London however, only 5,000 properties are available to choose from and first-time buyers would be looking at the cheapest 5% of the market.”

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