Our analysis comparing average transaction levels following the credit crunch with an extended period running up to the peak of the market in 2007 shows a shortfall of 527,000 transactions a year. This suggests more than half a million households a year would have stepped on or up the housing ladder in a fully functioning market.

These excluded households can be found across the country. Affordability is undoubtedly most stretched in London and the South East where prices are highest. Strong price growth in London, in particular, has priced many off the property ladder. Failure to save for a large enough deposit, to satisfy lenders’ more stringent criteria post credit crunch, remains the greatest barrier to homeownership.

The north and south of England have suffered a similar number of total shortfalls with declines of 165,290 and 179,116 respectively. Even in London where the market has been buoyant relative to the rest of the country, transactions are down by almost 60,000 a year, suggesting a considerable number of households are not participating in the property market.

The falls represent a larger percentage of total private housing stock in lower value markets, where buyers have less access to savings or housing equity and are therefore more likely to end up renting privately. Stronger population growth in London and the South will increase the pressure for privately rented homes in those markets.

As the economy improves and confidence returns to more parts of the market, we expect to see the increased transaction levels continue to be concentrated in higher value markets. The lack of savings or equity is likely to leave excluded households even further behind as house prices climb.

Many of those priced out of the owner occupier market may still aspire to own their own home like their parents before them, but face huge barriers that will not easily disappear.

Taken from
Spotlight: Bridging the Gap in Housing