"It is counter-intuitive but in many areas popular with first-time buyers, the situation is actually getting worse."
Zoopla's data found that the average income required for a first-time buyer to purchase a home has grown 9% since 2016 and stands at an average of £54,400 - over £4,500 more than the amount needed three years ago. The average deposit currently required for first-time buyers to purchase in a city is currently £38,418.
Gatehouse Bank's research found that despite falling house prices in London, first-time buyers are still paying more to get on the housing ladder.
In Barking and Dagenham, one of the most affordable areas in the capital, the average price paid by first-time buyers rose 2.91% in 2018 — up from £276,701 to £284,751.
This counter-intuitive trend was repeated across other areas favoured by first-time buyers. Hackney rise by 5.4%, Hillingdon by 0.67%, Hounslow rose 2.45%, Merton increased 3.61%, and Newham received a 4.87% boost.
However Zoopla's data shows that the income required for first-time buyers to purchase in the three most expensive UK Cities has fallen by an average of 5% since 2016.
First-time buyers in London need an average income of £84,000, £3,250 less than the amount needed in 2016 which was a high point following the global financial crisis.
Cambridge and Oxford require the highest incomes of anywhere outside of London, however the income needed to purchase has fallen in the university cities by -5% and -3% respectively.
Charles Haresnape, CEO of Gatehouse Bank, commented: “The trend for the London property market over the last year has been all about falling prices and most people would expect the one silver lining to be that first-time buyers would find it easier to get on the housing ladder.
“Sadly that’s not the case. It is counter-intuitive but in many areas popular with first-time buyers, the situation is actually getting worse. A young couple hoping to buy in Hackney today would have to find an extra £27,310 to purchase a property compared to a year ago.
“It could be that the shortage of affordable housing for first-time buyers is forcing up prices in areas where it is generally cheaper to get on the housing ladder. This continuing disparity means first-time buyers are experiencing a two-speed London, with prices moving in different directions as you cross borough boundaries.”
Richard Donnell, research and insight director at Zoopla, added: “Weakening city house price growth is a result of market fundamentals. Specifically, changing affordability dynamics for home buyers and the impact of successive tax changes since 2015. Together, these have impacted household buying power, and demand for housing, hitting high priced cities more than others.
“First time buyers are an important group accounting for more than one in three sales. While the average household income to buy a typical home across UK cities has grown 9% since 2016, weaker price growth and recent price falls have led to a 5% reduction in the income to buy across the most expensive cities. It will come as a modest relief for would-be buyers although the income to purchase still remains relatively high. While it is a factor behind weaker house price growth it supports underlying demand for rental homes.
“Affordability remains attractive in many regional cities where house prices have not registered the gains seen in south eastern England. Liverpool has the lowest income required to buy and has the highest rate of price growth at 5%. We expect prices to continue to increase in cities where housing is in reach of those on average incomes.”
