Four in 10 full-time workers priced out of homeownership

Four in every 10 (40%) UK working households cannot afford an average-priced two- or three-bedroom home with an 80% loan-to-value (LTV) mortgage, according to research from Zoopla.

In London, 74% of working households cannot afford to purchase an average two- or three-bedroom home. Across the broader southern regions of the South East, South West, and East of England, over half (58%) of workers face similar barriers to homeownership.

In contrast, regions outside southern England show better affordability, but still, 20% to 30% of workers on lower incomes are priced out of the housing market.

In York, 61% of workers are unable to buy an average-priced home, while the figures stand at 57% in Trafford, 46% in Leicester, and 45% in Edinburgh. Across 18 local authorities outside southern England, more than 40% of workers are priced out of the market.

The affordability crisis is particularly severe for single-earner households. According to Zoopla’s findings, 57% of single earners are unable to purchase a lower-priced home (in the lower quartile of the market). This has led to a marked decline in single-earner homeownership. Bank of England data shows that the proportion of single earners securing mortgages has dropped from 45% in 2007 to just 32% today.

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Richard Donnell, executive director at Zoopla, said: “The unaffordability of homeownership is a real risk to labour mobility and economic growth, particularly in southern England. As more people are priced out of buying, the pressure on the rental sector intensifies, with rents rising faster than house prices since the pandemic.”

With homeownership out of reach for many, demand for rental properties has surged, yet the number of available rental homes has remained static since 2016. Average rents for new tenancies have risen faster than house prices since the pandemic, especially in areas where affordability constraints have curbed house price growth.

Nationally, 27% of full-time workers cannot afford private rental costs, compared to 40% unable to buy. In London, however, 67% of workers are unable to afford rent on two- or three-bedroom homes. Across southern England, around a third (32%) of workers face similar challenges.

Working households in the UK have a finite set of options to ease the burden of rising housing costs. For renters, the primary avenue is allocating more of their income towards rent. For prospective buyers, the main strategies include purchasing a smaller property or increasing the size of the deposit, though these options come with significant constraints.

Zoopla said the option of buying smaller homes offers limited benefits, particularly due to a scarcity of such properties on the market.

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Meanwhile, the growing pressure on buyers to provide larger deposits is increasingly shaping affordability. In 2023, the average deposit for first-time buyers in London reached 33%, compared to a UK-wide average of 20%, according to the Office for National Statistics (ONS).

While putting down a 33% deposit on a two- or three-bedroom home at the lower end of the market can help more households enter the property ladder, the impact is still modest. An estimated 7% more working households could afford to buy in this scenario. The benefits of larger deposits are most pronounced in southern England, where housing costs remain among the highest in the country.

Nathan Emerson, CEO of Propertymark, said: “Regional house price differences remain a significant concern for people looking to purchase a property. For many people, owning a home is becoming a very challenging prospect to achieve.

“All eyes will likely be on the forthcoming budget to see what proposals may affect those looking to purchase, but also to see if what support might be offered to first time buyers.”

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