The Ethical Forestry Homebuyer Index

Executive Summary

February 27, 2014

Ethical-Forestry-homebuyer-index

Since the crash of 2008, the UK housing market has been analysed in considerable detail. In a recent report from property website, Rightmove, “asking prices for homes in Britain saw their biggest ever rise for the December-January period”. The report reveals that towards the end of 2013 and since the turn of the new year, Britain has been growing faster than many other industrialised economies. It goes on to state that the housing market stands out in particular due to rising employment levels, low interest rates and government mortgage schemes. We concur that a growing real estate market is positive news for the economy on the whole, but just where is the growth coming from?

Financial Times analysis of a Savills report revealed that “the vast bulk of the equity gains from Britain’s rising housing market over the past decade has gone to landlords and wealthier individuals who own their homes outright”. This suggests that although more homes are being bought, this is not indicative of more people getting a foothold on the property ladder. Indeed, according to the most recent ONS Consumer Prices Index (CPI), “annual house price growth rose faster than the cost of living” and looks like it will continue to do so.  

We have developed The Ethical Forestry Homebuyer Index (EFHI) to better understand how UK consumers feel about the property market, deconstructing the varying factors that define their attitude to buying a home.

 

Introduction

In contrast to the widely reported kick-start to the UK economy and housing market, our research reveals a considerably more despondent Britain. We discovered that only one in ten (10%) UK adults think they will be able to purchase their first home in the next five years – a considerably less optimistic consumer than the market growth suggests. Although men are more confident (12%) than women (9%), our research also reveals just 6% of the UK have bought a first home in the last five years. Interestingly, the male confidence is not backed up by recent statistics into actual properties bought, as more women (7%) have bought their first home in the last six years than men (5%). The majority, perhaps unsurprisingly, fell into the age bracket of 18-34 (15%).   

These headline figures further underline the fact that more needs to be done for those looking to get on the property market, including raising awareness around alternative savings methods. The EFHI is defined by three key areas of analysis: how long the UK prospective homeowner expects to save; what levels of financial support the UK consumer needs to purchase a home, and how those who are saving are doing so.  

As well as our own research, we have also looked at the Land Registry House Price Index (LRHPI), allowing us to align official sales figures to the perceived expectations of the average UK homebuyer.

 

Section One: The Analysis

UK saver optimism: This section explores the length of time UK savers expect they will have to save for their first home, what age they expect to be when they purchase their first home, and any key gender specific differences that define the results. 

The EFHI reveals that over one in ten (12%) Brits expect to save for a home for between six to eight years, with men (14%) more likely to save for that length of time than women (7%). However, we also discovered that more than 350,000 UK savers who hope to purchase their first home in the next five years anticipate that it will take more than 14 years to do so.   

When looking at the longer term scale – a ten year outlook – more than one in ten (11%) think they will have to save for somewhere between nine and 11 years. Nearly one in ten (7%) of women hoping to buy in the next decade believe it will take more than 14 years, almost double that of men (4%). The average person believes they will be 31 before they can buy their first home, and nearly a quarter (23%) think they will be between the ages of 35-44. Over one in ten (12%) think they will be between the ages of 18-24, with younger men less confident (10%) of doing so than women of that age (14%). These expectations are supported in a recent Post Office report, which reveals the average age of the first time buyer is steadily increasing year-on-year. Since 1960, the average age of the first time buyer has moved from 24 to 30 in 2013. 

Our findings show a British public who believe buying a property is highly unlikely in the short-term. The perceived lengthy saving times our study reveals represents just how difficult it is to get onto the property ladder in continued times of economic strain. The ONS CPI study, which reveals that annual house price growth rose faster than the cost of living, suggests that there is simply not enough disposable income for us to save any faster – sentiments echoed by the less than optimistic views of savers in the EFHI report. 

 

Section Two: Saver Profile 

Saving support: The following subsection assesses how many people in the UK need financial support to buy a home, as well as the individuals they are turning to in order to receive it.  

The majority (60%) of Brits looking to buy a home in the next ten years or who have already bought a home in the last five years admitted they will need/needed financial support to do so. Just under half (44%) revealed that their parents were the source, highlighting the fact that the majority (56%) have to look to alternative providers in order to save. Interestingly, over one in ten (13%) Brits are borrowing money from a sibling, with men three times as likely (18%) to do so than women (6%). The same percentage (13%) receive support from their grandparents, and one in ten (10%) also admitted they will need or already received support from a friend. With such high numbers needing support to get onto the property ladder, there will no doubt be many throughout the UK unable to source the much-needed finance to do so.

Saver methods: This subsection looks at how those who are saving to buy a home are doing so.

The majority (54%) of Brits saving to buy a home are doing so with the help of a savings account with a bank. This is true of men (59%) more so than women (47%). However, more than one in five (21%) are saving to buy their first property by using a current account. Once more, this is a more popular saving method amongst men (25%) than women (17%). Interestingly, the same percentage of the UK (21%) is saving cash in order to buy their homes. The specific locations in which the cash is stored was not verified, however the risks that a fifth (21%) are taking by keeping cash to buy a home are numerous.   Nearly a quarter (24%) of men admitted that saving physical cash was their method of choice, compared to 17% of women. Despite the risks, saving in cash has contributed to the saving methods of 16% of those who have already bought a home. One in five (20%) stated they were self-investing in order to raise funds to purchase a property, with more men (25%) than women (15%) admitting to doing so.  

Familiarity was the number one reason given for why savers chose their preferred method of saving, with nearly a third (31%) stating so. Second to familiarity was administrational ease, with over a quarter (28%) citing this as the primary reason they chose their preferred method. Interestingly, one in ten (10%) saw not being able to access their money as the reason they saved in the fashion they did, with a further 14% stating they did so due to a recommendation from a friend. Nearly one in ten (8%) did so because the investments they made were green or ethical – a factor considerably more popular amongst men (12%) than women (3%).  

 

Section Three: Optimism vs. Reality 

The EFHI looks at what UK consumers think about their prospects and the UK property market as a whole. To offer further context to their sentiments, the LRHPI allows us to look at financial data both nationally and regionally. The local data found in the LRHPI in particular adds to our own significant regional analysis.

The most recent LRHPI reveals that the average house price for the UK is now £165,411. This figure is up 3.2% annually, outlining once more a growing property market, broadly across the UK. London leads the way, with an annual increase of 10.6%, taking the average price in the nation’s capital to £395,646. In real terms, the report reveals a 24% increase in the number of properties sold over the period September 2012 to September 2013. However, the highest increase was amongst properties valued from £1.0-£1.5m, and the lowest were priced at £50k-£100k, once again suggesting that the property market is more accessible to the wealthy investor. 

LRHPI Regional Breakdown

Homebuyers-Index-Chart

To support this, we commissioned our own regional analysis.

 

Section Four: Regional Snapshots

The regional differences evident throughout the UK are hugely significant to the UK property market as a whole, and therefore vital to the development of the EFHI. The following bite-size regional snapshots highlights the specific data that defines each area, of which key statistics include:

More people in the North East think they will need financial support than any other region

Only 11% of people in the North West self-invest – the joint lowest in the UK

People in the East Midlands are the least optimistic (5%) about purchasing a house in the next five years – the lowest in the UK

Nearly a quarter (23%) in the East of England think they will receive or have received financial support from a grandparent – the highest in the UK

22% of Londoners think they will purchase a property in the next five years – the highest in the UK

People in the South West think they will be 34 before they buy their first home – the oldest in the UK

Just over a quarter (27%) of people in Scotland think they’ll need support from their parents – the lowest in the UK

 

North East

Second most confident of buying in the next five years (13%)

Highest percentage to have been saving for between 9-11 years (15%)

People in the NE think they will be 29 when they buy their first house – joint second youngest in the UK

More people in the NE (74%) will need financial support than any other region 

Interestingly, more will borrow from friends (20%) than any other region 

Majority of the NE save with a bank (61%) – the second highest in the UK

Nearly half (44%) save in cash – second highest in UK

Over a third keep (36%) their money in a current account – the second highest in the country

Those in the NE are the second most conscious of green/ethical/sustainable investments, with 16% stating this was the reason they chose to save in the method they did

A quarter (25%) did so because they couldn’t access the money for a set period of time – the highest percentage in the UK

 

North West

One in six (16%) of those in the NW expect to/have already saved for 9-11 years – the fourth highest in the UK

People in the NW believe they will be 32 years old when they buy their first house – the tenth oldest of 12 regions in the UK

Only 56% of those in the NW think they will need financial support to buy a house – one of the lowest in the UK (8 of 12)

Only 4% will borrow from siblings – three times fewer than the UK average

Only 48% save with a bank – one of the lowest in the UK; they were also the third lowest to save in a current account (11%)

Only 20% use a building society – the third lowest 

However, only 11% self invest – the joint lowest

 

Yorks & Humberside

Third most confident about buying in the next five years, with over one in ten (13%) intending to do so

More people in Y&H are yet to start saving (32%) than any other region

Interestingly, 15% of people in Y&H don’t know how long they will have to save – the highest in the UK and nearly three times the UK average

People in Y&H think they will be 32 when they buy their first home – the ninth oldest of all the regions

Those in Y&H are the seventh most likely to not need financial support (59%) 

Only 5% in Y&H have their savings in a building society – the lowest percentage in the UK and seven times less than the UK average

Nearly one in three (31%) of those in the region have their savings in a current account – the third highest in the UK

42% of those in Y&H decided to save in their particular method because it was easy/they didn’t have to do much – the highest percentage of all the regions in the UK 

 

East Midlands

People in the East Midlands are the least optimistic about buying a house in the next five years, with only 5% thinking it possible – half the UK average (10%)

Over one in ten (12%) of those in the East Midlands think it will take 9-11 years to save – joint second highest in the UK

Nearly one in five (17%) of people in the East Midlands think it will take between 12 and 14 years to save to purchase a home

People in the East Midlands are the third most likely to borrow from their parents (51%)

A higher percentage of people in the East Midlands (37%) than any other region made their decision to save in the fashion they did because of the interest rates on offer

42% chose their particular savings method because it allowed them instant access to the cash – the second highest in the UK

Nobody in the region has their savings in cash

 

West Midlands

Nearly one in ten (7%) of those in the West Midlands believe they will have to save for more than 14 years in order to buy a home – the joint highest in the UK

Those in the West Midlands are the fourth most likely to need financial support in the UK

42% of people in the West Midlands have their savings in a building society – the second highest in the UK

Less than one in ten (8%) of those in the region have their money in a current account – the lowest in the UK; even less (7%) have their money in cash – the second lowest in the UK

Just over one in ten (11%) saved in the fashion selected because it was easy – the lowest in the UK 

 

East of England

Those in the East of England are the joint least optimistic about purchasing a house in the next five years

Conversely, people saving to buy a house in the East of England are the most confident of saving to do so in under three years – 41% 

Over a quarter (29%) of those in the East of England think they will be able to buy a house between the ages of 18 and 24 

Despite this, over one in ten (13%) think they will be between the ages of 45-54 – the second highest in the UK

Those in the East of England are some of the least likely to need financial support from anyone else (9 of 12)

Nearly a quarter (23%), however, will or have already received help from a grandparent – the joint highest in the UK

Nearly one in five (17%) will receive help from a friend – the second highest in the UK

Nearly two thirds (65%) of people in the East of England have their savings in a current account – the second highest in the UK

 

London

More people in London are looking to buy a property in the next five years than any other region – with 22% saying so

Nearly one in five (19%) of Londoners have already been saving for 6-8 years – the highest in the UK

Nearly one in ten (7%) have been saving for more than 14 years – also the highest in the UK

Londoners expect to buy a home at a later age than the majority of the UK (11 of 12), with the expected age being 33

Those in the capital are also some of the most likely to need financial support, with 70% admitting so – the third highest in the UK

It appears London-based grandparents are some of the most giving, too, with 23% needing financial support from grandma and/or grandpa – the joint highest in the UK

Nearly one in five (17%) people in London will look for financial support from a friend – the second highest in the UK

Around a quarter (24%) in London have their savings in cash – the third highest in the UK 

Nearly a third (30%) are self-investing in order to raise the cash to buy a house – the second highest in the UK

Over a third (34%) of Londoners admitted they made their savings choice because it was easy – the highest in the UK

Almost one in five (18%) of Londoners chose their method of saving because the investments made were green/sustainable/ethical – the highest in the UK and twice the UK average

 

South East

Over one third (39%) of people in the South East expect it to take only 3-5 years to save to buy a house – the second highest percentage in the UK

People in the South East are some of the most confident in buying young, with the average buyer age listed at 29 – the second youngest in the UK

People in the South East also state they are less likely to need financial support from anyone else in order to purchase a home – 50% still need it, but of the 12 regions, it places tenth 

Only one in ten (11%) have their savings in cash – the joint second lowest in the UK

 

South West

Only 6% of the South West think they will purchase a home in the next five years – one of the lowest (9 of 12) in the UK

A higher percentage of people in the South West, more so than any other region (38%), are in their first three years of saving

Despite this, nearly one in five (17%) think it will take somewhere between nine and 11 years to purchase their home – the third highest in the UK

People in the South West think they will be 34 before they buy their home – the oldest in the UK

More than one in ten (13%) think they will be between the age of 45 and 54 – the highest in the UK

People in the South West are the least likely to need financial support in the UK,  – so they say – with only 38% suggesting they’ll require support

Only 7% of people in the South West are saving to buy their house through investments – the lowest in the UK

42% of people in the South West saved in the fashion in which they did because it was who they already banked with – the second highest in the UK 

 

Wales

Over one in ten (12%) of people in Wales have already been saving for 9-11 years in order to purchase their first home – the third highest in the UK

Nearly a third (30%) of people in Wales stated they didn’t know how long it would take to save to buy their home – the second highest in the UK

One in ten people (10%) in Wales think they will be between 45-54 years old when they purchase a home – the third highest in the UK

Only 47% of people in Wales have their savings in a bank – the lowest in the UK

Only 8% self-invest in order to raise funds – the second lowest in the UK

 

Scotland

People in Scotland are some of the least likely to buy a home in the next five years (8 of 12) 

Nearly one in ten (8%) of people in Scotland expect to save for somewhere between 12 and 14 years – the second highest in the UK

Those in Scotland think they will be able to buy a house at the age of 29 – the third youngest in the UK

They are also some of the least likely to need financial support – with 50% requiring it (11 of 12)

Just over a quarter (27%) of people in Scotland think they’ll need support from their parents, the lowest in the UK

Scottish people are the third most likely to have their savings in cash – with 29% admitting so

Over a quarter (28%) are raising funds by investment – the third highest in the UK

 

Northern Ireland

Only 6% of people in NI think they will buy in the next five years, although this doubles when planning over ten years

An overwhelming majority (70%) of people in NI think they will have to save for between 6-8 years to purchase their home – the highest in the UK

Despite this, people in NI think they will purchase their home at the youngest age – 26

73% of those in NI admit they’ll need financial support – the second highest in the UK

73% of people in the region have their savings in a bank account – the highest in the UK

More than half (54%) in Northern Ireland also self-invest to raise funds – the highest in the UK

The same percentage (54%) also see trust as the main factor for why they save in the way they do

 

Section Five: Conclusion

The Ethical Forestry Homebuyer Index underscores three distinct areas reflective of the UK consumer attitude towards purchasing a property. Primarily, and deserving of the most focus, is the overall lack of optimism synonymous with those who desire to own a home. Far from a predicted outcome, the stand-out statistic of only one in ten who feel it possible to purchase a home has translated into a meagre 6% who have actually managed to do so in the last five years. 

Second to the large majority who do not feel that purchasing a property in the next five years is realistic, a significant 60% feel they will need or have needed family or friend based support to do so. 

What is beginning to emerge is a disenfranchised public in the context of the UK property market, further indicative of a nation that requires greater information around effective savings strategies and wealth management. This is particularly relevant in a time when an ever-increasing cost of living (ONS report) is supplemented by the rising property prices (LRHPI), suggesting even less opportunity to save the capital needed to purchase a home.

Although nearly one in ten of the UK public stated they had turned to the returns of self-investing, one in five are resorting to storing physical cash. This realisation calls for far greater accessibility to knowledge and strategic financial planning, enabling a heightened awareness amongst the UK saver, not solely for capital preservation, but also as a means of accelerating to the first rung of the long-awaited property ladder. 

 

About the research

The research was carried out for Ethical Forestry by Opinium Research, which interviewed a nationally representative sample between 14th and 16th January 2014.  

Opinium are members of the following organisations and are bound at all times by their codes of conduct:

British Polling Council

Esomar

MRS

PRCA

To find out more, visit www.opinium.co.uk