Bad news for FTBs – house prices are rising by £24 every day

The average first-time buyer (FTB) is spending £223,751 on their first property, 24% more than in 2016, according to new analysis from Direct Line Home Insurance.

The average FTB needs to find £43,623 more than they did six years ago to secure their first property. Over the same period, the average salary of a millennial – the demographic that is likely to buy their first property – has risen by just 10%, leaving them with a huge deficit.

A typical FTB property is now worth roughly seven times a 30–39-year old’s annual salary, a rise from 2016 when it was six times, making the first rung on the property ladder increasingly hard to reach.

What is driving this growth?

Direct Line’s analysis suggests that FTB prices are being impacted by the movements of those in their 30s across the country.

In the 10 local authorities that saw the greatest increase in residents aged 30-39, the average FTB house price rose by 24% between 2016 and 2021. In the 10 authorities with the greatest decrease in the number of 30–39-year-old residents, there was a 2% decrease in prices.

Additionally, areas with an above-average increase in residents of those in their 30s, saw FTB prices rise by 22% over the past five years, compared to just 10% in areas with a below-average increase of residents in this age group.

FTB hotspots revealed

Looking more deeply into local FTB hotspots, the areas with the fastest-growing prices in Britain are Burnley in Lancashire (up 45% over the past five years), the Orkney Islands on the north coast of Scotland (44%), Rossendale, Lancashire (42%), Bury (40%) and Rutland, East Midlands (40%).

These five councils averaged a house value of £119,735 in 2016 and this rose by £50,158 to £169,893 in 2021, an increase of 42%.

What’s more, these five areas also saw a 9% increase in residents aged 30–39-year-old over the same timeframe, compared to a national average increase of just 5%.

Regional findings

It comes as no surprise that London is the most expensive FTB market, with average prices reaching £440,590 last year. However, it is also the region with the most stagnant FTB market, rising by just 7% (£30,323) over the past five years.

The five London boroughs that saw the sharpest increase in FTB prices (Barking and Dagenham, Hackney, Waltham Forest, Redbridge and Havering) also saw a rise in 30–39-year-old residents. These boroughs saw an FTB price increase of £55,112, or 16% over the past five years. Over the same time, the number of young people living in these areas grew by 4%.

Across the capital, the population of 30–39-year-olds fell by 1% as young people looked outside of the capital for their first home – potentially due to their change in working patterns since the Pandemic hit.

Similarly, the areas with the highest FTB prices (Kensington and Chelsea, Westminster, the City, Camden and Hammersmith) – averaging house prices of £782,773 saw a 5% decrease in 30-39-year-old residents over the past five years.

Dan Simson, head of Direct Line Home Insurance, comments: “The rate at which FTB prices have been increasing is frankly frightening. However, this generation of property owners are facing the challenge of dramatically increasing property prices in traditionally popular areas such as London and instead are buying in places that are less well-known.”

“We may see an even more dramatic emergence of these “young towns & cities” with the increasing prevalence of remote working that enables people to be far more flexible as to where they live.”

He concludes: “Given the commitment people need to make to get on the property ladder, it is vital they protect their investment with insurance should the worst happen.”

Table one: Changes in first-time buyer house prices across the UK, 2016-2021

Source: Direct Line Home Insurance, 2022