First time buyers are chasing a moving target, with the average first home in England projected to cost almost £23,862 more by 2030, according to analysis by Coventry Building Society.
The Office for Budget Responsibility (OBR) forecasts house prices to keep rising over 2% each year until 2030. If those forecasts prove accurate, the average first time buyer property in England would increase from £245,515 today to around £269,377 by the end of the decade.
That means aspiring homeowners may need to find an additional £23,862 to buy a typical first home. With house prices continuing to rise, a buyer saving today isn't saving for today's deposit, they're saving for the deposit they may need by 2030.
Someone paying a 10% deposit on an average-priced first time buyer home would need to find an additional £2,386 upfront – equivalent to saving £56 extra a month from now until 2030.
Rising house prices could also increase the likelihood of first time buyers facing Stamp Duty costs. As property values continue to rise, average first time buyer homes in many parts of the country could move above the current £300,000 threshold for first time buyer relief, adding to the upfront costs buyers face.
The Government announced on 26 September that a new equity loan scheme, Your First Home, will be confirmed at next month's Budget. It is expected to support 2.5% deposits, backed by 20% government-backed equity loans, for first time buyers in England purchasing a new-build home from a participating developer, with details on costs, income and price caps, and timelines still to come.
Where average first time buyer house price deposits could rise most
While the challenge is nationwide, the amount first time buyers may need to save varies significantly across the country.
In County Durham, the most affordable area in the analysis, the average first time buyer home is projected to rise from £132,748 to £145,650 by 2030, meaning buyers would need to save around £30 extra a month to maintain a 10% deposit.
At the other end of the scale, buyers in Surrey could need to save an additional £88 a month to maintain a 10% deposit on a projected average first time buyer home worth £419,494.
Figures for Greater London have been excluded, but they highlight the scale of the challenge in the capital. The average first time buyer property is projected to rise from £496,302 to £544,539, meaning buyers would need to save an additional £114 per month to maintain a 10% deposit.
Jonathan Stinton, Head of Intermediary Relationships at Coventry Building Society, said:
“For first time buyers, the deposit challenge is a moving target. People are not just saving for the price of a home today, they are trying to keep pace with where prices could be by the time they are ready to buy. Even modest annual increases can add up over several years, meaning buyers may find their goal has shifted significantly.
“Starting to save early can make a real difference. These projections aren’t about putting people off buying a home but highlighting the importance of planning ahead and understanding how much you may need by the time you’re ready to take that step.
“Buying a first home remains a major milestone for many people and understanding how your target could change over time is an important part of preparing for that journey.”
While future house prices are never certain, the findings highlight the pressures many first time buyers could face in the years ahead. The challenge is not only saving enough to buy a home but keeping up as the goalposts continue to move.
