Zoopla research finds 40% of full-time workers priced out of home ownership across Great Britain
- New research from Zoopla finds over half (58%) of working households in southern England can’t afford to buy an average-priced two-bed home. They also can’t afford an average-priced three-bed home.
- Almost three quarters (74%) of full time workers are incapable of buying in London
- Home ownership is accessible to most workers across the rest of Britain, although there are hotspots emerging in regional cities including York, Trafford and Leicester where buying is unaffordable for the majority of full time workers
- Single earners are at a significant financial disadvantage when buying a two or three-bed home. 57% of single earners can’t afford to buy
- The unaffordability of buying puts huge pressure on the rental markets where supply is not growing and rents have risen faster than earnings
- The report has important implications on how the target to build 1.5m new homes can start to alleviate widespread affordability challenges for workers across Britain
Zoopla has conducted comprehensive new research. They are one of the UK’s leading property websites. The research reveals that 40% of working households can’t afford an average-priced two or three-bed home. This is based on an 80% loan-to-value mortgage.
The research assesses the affordability of housing to rent and buy for working households across Great Britain. The report identifies structural factors that generate higher home values and worse affordability outcomes. It discusses the implications for Government on how to improve affordability. It also outlines the types and tenures of new homes required in future.
Three-quarters of workers in London can’t afford to buy a property
Access to homeownership is a major challenge for workers across southern England. It is more challenging than for the rest of Britain. This issue is mainly due to higher house prices. The report finds that 74% of London workers need help to afford an average-priced home. This includes two or three-bedroom homes. More than half of workers, specifically 58%, need help to afford to buy in southern England. This includes the South East, South West, and East of England. Across the rest of Britain, access to homeownership is better. Yet, the study finds that 20-30% of workers on the lowest incomes can’t buy.
Restricted access to home ownership in unaffordable markets affects labour mobility. It also impacts attracting inward investment to support economic growth. To improve affordability, one can use a larger deposit. Another choice is to buy smaller, lower-priced homes. The report finds these deliver modest benefits in improving access to home ownership. House prices can rise more slowly than income growth. This method takes years to shift buying power and improve access to housing.
Growing pockets of unaffordability across several cities outside southern England
The study from Zoopla also shows that home ownership affordability is becoming more challenging. This issue affects an increasing number of regional cities outside southern England. Growth in jobs and incomes has pushed both house prices and rents higher.
In York, 61% of workers can buy a two—or three-bedroom home. This is followed by 57% in Trafford, Greater Manchester. In Leicester, 46% of workers face this issue. In Edinburgh, it is 45%. There are 18 local authorities outside of southern England. In these areas, more than 40% of workers can’t buy.
Single-earner households at a major financial disadvantage
The study also explores the affordability of housing for single earners. It reveals that 57% are not able to buy homes. This assumes they acquire an average-priced two or three-bed home at the lower end of the market (lower quartile price). Homeownership is less affordable in all regions of Great Britain. This is compared to an average multi-earner working household.
The Bank of England provides data for new mortgage lending (MLAR statistics). It shows a decline in the proportion of single earners buying homes with a mortgage. This figure has fallen from 45% in 2007 to 32% today. This highlights the squeeze on single earner households.
The knock-on effect on the rental market
Home ownership is becoming increasingly unaffordable. This is compounding the pressure on the private rented sector. The total number of rented homes has been broadly static since 2016. The growth in average rents (for new lets) has outpaced house prices since the start of the pandemic (March 2020). House price growth has been below the UK average in London and southern England. Affordability constraints reduce demand and restrict increases in house prices. In contrast, house prices have grown faster in markets where more workers are priced into the market to buy.
The study finds that just 27% of full-time workers nationwide are not capable of affording private rental costs. A higher percentage, 40%, are unable to afford buying. Renting is most unaffordable in London. About 67% of workers living in London can’t afford the rent for two—or three-bedroom homes. Just under a third (32%) of workers cannot afford rent across southern England.
How can the affordability of buying be improved?
Working households have a finite number of options to improve affordability. The first alternative is to buy or rent a smaller home, depending on the required space. Another option is to use a larger deposit. The main choice for renters is to spend more income on renting.
Buying smaller homes has limited benefits compounded by a scarcity of smaller sized homes to buy. There is growing pressure on buyers to put down larger deposits to reduce the size of the loan required. The average first-time buyer deposit was 33% in London in 2023 compared to a UK average of 20% (Source: ONS). Using a 33% deposit can improve access. It helps when buying a two or three-bed home priced at the lower end of the market. This would allow an additional 7% of working households to afford buying a home. The greatest benefits are felt in southern England.
Commenting on the study and the implications, Richard Donnell, Executive Director at Zoopla, said: “Home ownership is becoming unaffordable. This is a real risk to labour mobility. It also threatens the growth of the housing supply, especially in southern England. More than half of full-time workers in this region can’t buy an average-priced home. As more people are priced out of buying, pressure on the rental sector increases. Rents have risen faster than house prices since the pandemic.
“Our analysis has important implications. It affects the type and tenure of homes built over the next five years. The narrative on home building needs to move beyond headline numbers. It should focus on the necessary types and tenures of new homes. These new homes are needed to support economic growth and improve access to home ownership. There is no simple one-size-fits-all approach; the types of homes needed vary across the country. Increasing social and private rented homes is crucial. Building these homes helps ease pressures across the housing market.”
