First-time buyers have seen house prices surge three times faster than before Covid

Getting on the property ladder is proving harder than ever for first-time buyers with asking prices and rents for homes rising three times faster than pre-pandemic.

New analysis from Rightmove found asking prices for homes with two bedrooms or fewer – classed as first-time buyer type properties – are up 13 per cent since July 2020. That’s the equivalent of £17,500 higher on average – while they only rose by 4 per cent or £8,000 between July 2018 and 2020.

Rent rises also make it harder to save up for a deposit to buy a home. Record rent rises have seen the average monthly rental payments surge by 17 per cent or £128 per month in the last two years. That’s higher than the 14 per cent rise in earnings over the same period.

The scenario is locking more people out of the housing market despite the Conservative government’s vow to boost home ownership.

“For would-be first-time buyers who are trying to save up a deposit, they are chasing a fast-moving target as average asking prices for first-time buyer homes hit another new record, and rise more quickly than they did before the pandemic,” said Tim Bannister, Rightmove’s data expert.

“For those that aren’t able to live with parents or family members while saving, they also have to manage paying record rents both inside and outside of London.

“We understand how difficult this challenge can be, and something we’ve seen more of over the last couple of years, particularly with working from home becoming more common, is people looking further away or at a greater number of different areas when looking to move, to see what is available within their budget.”

Overall, first-time buyer type properties have hit a new record across Great Britain with an average price of just under £224,943.

That means buyers must save £22,493 for the average 10 per cent deposit and that has moved further out of reach in the last two years, up £2,500 since the pandemic hit. By contrast, deposits rose by £800 between 2018 and 2020.

If first-time buyers do manage to beat the odds to get a deposit together and secure a new property, the reality of rising payments does not end when they move in.

Rising housing prices and interest rates mean monthly payments are up to 22 per cent higher than two years ago. A first-time buyer pays £976 a month in mortgage payments  on average – £173 a month higher than two years ago – while between 2018 and 2020 payments rose by £41.

Despite the challenges in buying a home, Rightmove found that demand remains high, with 35 per cent more people enquiring to buy first-time buyer homes now than in 2019 before the pandemic.

Demand is also high in the rental market with some renters even paying over the odds to rent a property, according to Richard Davies, managing director of estate agents Chestertons.

“London’s rental market in particular has seen unprecedented demand that is outstripping supply,” said Davies.

“This has created an extremely competitive market for tenants and many have begun offering landlords more rent than they are asking in order to secure a property. Other renters are worried about the cost of living and wider economic uncertainty which prevents them from taking on a costly move.”