House prices have been rising rapidly, making getting that foot on the property ladder even more difficult for young people.
Nationwide Building Society has revealed that, in fact, only 20 per cent of homeowners are in the 20-24 age group, compared to around 30 per cent a decade ago.
The ever increasing gap between house prices and the average first-time buyer income is preventing the traditional first-timers from entering the property ladder.
House prices have actually increased by more than 200 per cent since 1996, whereas earnings have increased by less than 50 per cent.
But how is 40 per cent of the market still dominated by newcomers?
The answer to this puzzle lies in the types of homebuyer that fall into the first-time buyer category.
No longer can this group be referred to as a young person, or couple, getting their very first foot on the housing ladder after saving hard for a deposit.
According to research carried out by Nationwide, this category actually includes a significant proportion of buyers returning to the market, perhaps after a spell in rented accommodation or moving from dissolving households.
Fionnuala Earley, nationwides Group Economist, said: These buyers differ from the stereotypical picture of a first-time buyer as they tend to be older and thus on higher incomes.
More importantly however, such buyers often have access to deposits funded from past increases in house prices which ease them back into the market. In 2005 returners may have accounted for up to 20 per cent of all first-time buyers.
Cheerio to the fresh-faced buyers
Nationwides affordability index attempts to track the movement in affordability for true first time buyers by using earnings data which captures all prospective home owners.
Importantly this measure is close to the household income of renters so it fits well with the pool of people who are most likely to be aspiring home owners.
Affordability has deteriorated significantly over the last few years; mortgage repayments for a first-time buyer on average earnings would no account for around 42 per cent of take home pay, compared with only around 18 per cent in 1996.
However, this still seems relatively modest compared to the height of the late 80s house price boom, when the ratio was more than 55 per cent.
Earley said: Deposit and income multiple constraints are equally, if not more, binding on first-time buyers and would prevent many from entering the market at all. Since around 2002 a gap has been widening between actual earnings and the earnings required to overcome income multiple constraints.
Now, less than 10 per cent of 22-29 year-olds can overcome lending income multiple constraints.
Average earnings are now around £27,500, which at the current income multiple of 3.1x would support a loan of £85,250.
Even the more generous multiples of around 4x available in the market, would only allow a loan of £110,000, which means that borrowers would have to raise a deposit of around £22,000 to be able to purchase a typical first home costing £131,903.
Earley commented: Aspiring homeowners would need to earn over £38,000 to be able to borrow at 3.1x income and have only a 10 per cent deposit. To borrow at 4x income they would need to earn almost £30,000.
With the average first-time buyer property costing £130,000, their average earnings would have to raise a deposit of over £46,000 which could take up to 10 years to save up.
And in London, the situation gets worse taking almost 15 years for a first-timer to save up the required deposit of over £100,000.
For many true, and particularly young, first-time buyers, the deposit and income multiple constraints are too strong and prevent them entering home ownership at all. This is even before considering other calls on their income such as student debts.
