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The Reality Gap: First-time buyers spend 23 per cent more than intended on their property

31st August 2017

  • Zoopla research reveals that first-time buyers underestimate the real cost of buying a home by 23.35 per cent (£44,240)
  • First-time buyers with the biggest reality gap between expected and actual costs are in London (39.49 per cent) and the North (30.78 per cent)
  • Getting on the property ladder takes first-time buyers four months longer than anticipated
  • First-time buyers are spending an average of 23 per cent (£44,240) more than they budget for on their first home, according to new research from Zoopla. The property website found that first-time buyers estimate they will spend an average of £167,359 on their home, but the actual cost comes to £211,599 – a difference of nearly a quarter of their original budget (23.35 per cent).

    Zoopla polled recent first-time buyers and those intending to purchase a property in the UK and found that those in London have the biggest ‘reality gap’. In the capital, house-hunters budget £259,158, but end up shelling out a total of £386,667 – a difference of £127,509 (39.49 per cent). This is followed by the North (£43,871 – a 30.78 per cent difference), the South* (£46,900 – a 24.01 per cent difference), and the Midlands, with a more modest £12,205 gap (7.75 per cent).

    The research highlights that this ‘reality gap’ begins with saving for a deposit, revealing that first-time buyers underestimate how much they will need to secure their home by an average of nearly £3.5k (£3,444) or 16.17 per cent. Pricey London tops the list as the region with the biggest disparity between estimated and actual deposit costs, with the average first-time buyer missing the mark by £9,250 (28.23 per cent). In the South buyers fall short by 21.95 per cent (£4,511), this is followed by the North, 16.5 per cent (£2,830), and the Midlands, with a 6.22 per cent (£1,221) ‘reality gap’.

    It’s not just the financial burden of buying a first home that is underestimated, but also the amount of time it takes to save for a deposit. The research revealed it takes the average first-time buyer over two years (26 months) to gather a down payment – four months longer than those intending to buy their first home predicted (22 months). Londoners, take 10 months longer to reach their target (30 months), meanwhile Northerners are more realistic in their expectations with it taking just two months longer than anticipated – a total of 24 months.

    While nearly two thirds (61 per cent) agree that gathering money for a deposit is difficult, those in the Midlands admit to finding it hardest (64 per cent). However, 38 per cent of Southerners feel the saving process was easy. Perhaps some find it easier than others as a result of sourcing funds elsewhere – a third of first-time buyers (34 per cent) rely on the ‘bank of mum and dad’, while 13 per cent use an inheritance fund to help towards their first property purchase.

    Lawrence Hall, spokesperson for Zoopla comments: “Buying a home can be a daunting process, and for first-time buyers with little knowledge of the property market it can be easy to underestimate the true cost of a home. Those in the Midlands appear to have a good understanding, with a comparatively small gap between estimated costs and actual purchase price. When buying your first home it’s important to manage your needs versus your desires – don’t be tempted to get carried away and make sure your budget includes all the associated buying costs.”

    The Reality Gap – regional disparities between property cost perception and actual spend

    Rank Region Perceived Cost Actual Spend Difference (%) Difference (£)
    1 London £259,157.89 £386,666.67 39.49% £127,508.80
    2 North £120,616.88 £164,488.19 30.78% £43,871.31
    3 South* £171,879.70 £218,779.53 24.01% £46,899.83
    4 Midlands £151,390.98 £163,595.89 7.75% £12,204.91

    Regional disparities between deposit perception and actual deposit required

    Rank Region Perceived Cost Actual Spend Difference (%) Difference (£)
    1 London £28,141.30 £37,391.30 28.23% £9,250
    2 South* £18,300 £22,811.48 21.95% £4,511.48
    3 North £15,891.16 £18,720.93 16.35% £2,829.77
    4 Midlands £19,011.72 £20,232.39 6.22% £1,220.67

    Average time to save for a deposit by region

    Rank Region Anticipated Time To Save (Months) Average Time To Save (Months) Difference (Months)
    1 London 20 30 10
    2 South* 22 27 5
    3 Midlands 23 26 3
    4 North 23 25 2

    Source: Zoopla, August 2017

    - Ends -

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