First-time buyers find housing market increasingly inaccessible

05 September 2007
The cost of buying a home in the UK worsened by 8.4 per cent in the second quarter of 2007, according to an accessibility index developed by RICS (Royal Institution of Chartered Surveyors).

The index found that accessibility has deteriorated by an incredible 350 per cent compared with the peak of accessibility, recorded in 1996.

Senior economist David Stubbs commented: “First-time buyers are facing an enormous struggle to access the housing market. This may worsen if the turmoil in the US market forces mortgage providers to tighten lending criteria and demand even higher deposits.”

The company claims that if a couple buying a property for the first time were both on lower quartile earnings (£25,899), they would have to save the equivalent of 96 per cent of joint take-home pay in order to accrue the typical £25,600 needed for a deposit and stamp duty. This is a huge increase compared with the 21 per cent required in 1996.

Couples on lower quartile earnings living in the South East or South West would have to save more than 100 per cent of combined take-home pay in order buy a property, with London proving the most inaccessible area in the UK. Meanwhile, couples in the same financial position living in Yorkshire and Humberside and in the North West of England need save only 73 per cent

In terms of mortgages, a couple in this earnings band would have to spend 44 per cent of their combined take-home pay on their mortgage compared with 38 per cent in the first quarter.

Mr Stubbs said: “Even if prospective first-time buyers make it onto the market, they face mortgage payments which take up a higher percentage of their take home pay than at any time since 1990.”

“House prices have risen by over 11 per cent a year since 1996, whereas first-time buyer incomes have only risen by 3.5 per cent a year. This has forced buyers to borrow ever greater amounts and now higher interest rates are applying pressure to the household finances of recent buyers,” he added.

Although he suggests some hope for the long-term, Mr Stubbs believes: “The present difficulties of first-time buyers will remain a feature of British society for many years.”

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