A small shift in affordability may help restore confidence for some buyers who have been waiting on the sidelines but it doesn’t fundamentally solve the structural supply shortage of 4.3 million homes across the UK housing market, which continues to push up prices and rents.
Despite the ONS figures showing that the gap between median average house prices and wages is narrowing, house prices remain several times higher than average earnings.
So, for many first-time buyers the challenge of entering the market remains significant.
Deposits are a major blocker while recent reports of lenders pulling sub-4% mortgage offers may also impact buyer confidence. For example, even at 95% Loan to Value, a 5% deposit on a £300k property is £15k. Then you add legal fees, and other costs.
REGIONAL TRENDS
Affordability also varies significantly by region with London continuing to have one of the largest gaps of an 11.10 ratio between house prices and earnings compared to northern cities, such as Leeds which remains comparatively more accessible for buyers and investors with a 6.48 point ratio.
Regional markets can behave very differently even when national affordability figures move in the right direction. In higher-value markets such as London, even small changes in pricing or mortgage rates can have a disproportionate impact on demand, whereas in more affordable regions, buyers and investors are often quicker to re-enter the market.
This could contribute to more first-time buyers looking beyond London towards regional cities where entry prices are lower and overall affordability is more achievable.”
INVESTORS AND LANDLORDS
Improved affordability can sometimes encourage more experienced investors to re-enter the market because prices stabilising relative to earnings can signal better buying conditions across the sector.
However, in the current market, with regulatory changes such as the expected Renters’ Right Act and possible future EPC requirements by 2030, we are seeing an increasing number of landlords review whether certain properties remain worthwhile long-term investments, with these changes directly increasing costs.
We see this mostly with older properties that may require significant EPC upgrades.
Across the market we are seeing signs that some smaller landlords are reassessing their portfolios against these new regulatory requirements. We are also seeing more landlords exploring flexible sale routes to exit the market quicker, particularly where properties are tenanted or where a traditional sale may take longer due to market conditions.
It’s likely we will see more direct and off-market transactions as markets stabilise because buyers and sellers are more willing to negotiate directly, looking for greater certainty or speed.
