House prices are increasingly out of reach for first time buyers

25 July 2018

Latest statistics from the ONS released today show:

  • The average first-time home in London now costs 13 times a buyer’s annual earnings

  • Housing was less affordable in 78% of local authorities in 2017, compared to the previous year

  • First-time buyers are ever more reliant on private savings to get on the ladder

The full release can be found here.

Laura Suter, personal finance analyst at AJ Bell, comments:

“First-time buyers find it harder and harder to get on the property ladder, as wages have failed to keep pace with the meteoric rise in house prices.

“In 1999 house prices in London were around four times the average salary for first-time buyers, but this has shot up and last year a first-time buyer faced house prices of 13 times their annual salary.

“This isn’t just affecting Londoners, as last year housing became less affordable for first-time buyers in 78% of local authority areas. While the north-east remains the most affordable for those wanting to get on the ladder, a first-time home still costs 5.5 times the average salary of someone under the age of 30.

“Clearly no mortgage lender will let you borrow this much, and so first-timer buyers are increasingly reliant on having a large pot of private savings to help fund their house purchases. Those wanting to get a foot on the ladder need to make the most of free Government money to help boost their savings pots. The Help to Buy Isa and Lifetime Isa give first-time buyers a 25% boost to their savings pot, up to certain limits.

“The average first-time buyer is now 30. If that individual had started saving the maximum £4,000 annual limit into a Lifetime Isa at age 20, they would have a deposit of just over £66,000 by the age of 30, assuming growth of 5% a year after charges. This includes £10,000 of free Government money, which would have grown to £13,207 in that time.

“Understandably, not every 20-year-old will have £4,000 to spare each year, but even if you put in half this amount each year, bolstered by the Government money, a couple would have a healthy joint savings pot come the age of 30.”

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