First-time buyers will need £64,000 salary to afford a home by 2020

Tired couple with boxes moving into new home apartment

A typical first-time buyer in the UK would need a salary of £64,000 to afford a home by 2020, new research from Shelter warns.

The housing charity’s report analysed the salary and deposit needed for the average first time buyer today, and calculated what they would be in 2020, if they grew in line with projected increases in house prices. The calculated rise in salary is an increase of nearly a fifth on the £52,000 needed for a typical first time buyer’s mortgage today.

On top of this, they would need a deposit of £46,000 to keep up with rocketing house prices, which are projected to rise to £270,000 over the next four years.

Indeed, the country’s shortage of supply has seen house prices rise six times faster than wages in the last five years, according to Shelter, which publishes its research just as the UK government’s controversial Housing Bill passes through the House of Lords.

Campbell Robb, Shelter’s Chief Executive, says: “When house prices are increasing six times faster than the average wage, it’s no wonder people on ordinary incomes are being locked out of a home of their own.

“With the situation only set to get worse, Generation Rent will be forced to resign themselves to a life in expensive, unstable private renting, and wave goodbye to their dreams of a home to put down roots in.”

The prediction arrives as home ownership in the UK is shown to be declining. Data from the Office for National Statistics show that the proportion of households who rent their home increased from 6 per cent to 11 per cent between 1988 and 2008, before rising to 16 per cent in 2014. The proportion of those who own their homes, however, rise from 56 per cent to 71 per cent between 1981 and 2008, but fell back down to 67 per cent in 2014.

Homeownership remains pipe dream for cash-strapped tenants

8th March 2016

Homeownership remains a pipe dream for many cash-strapped tenants in the UK, as renters struggle to afford a deposit for a home.

Over half (51 per cent) of Brits are considering buying their first home or moving house, according to new research from Gocompare.com, but high property values, together with the associated home-buying costs, mean that 61 per cent are unlikely to do so in the next 12 months.

The research found that those considering buying or moving home have been thinking of doing so for an average of 3.2 years, with high property prices(22 per cent), getting enough money together for a deposit (18 per cent) and the associated costs of buying a property and moving (11 per cent) cited as the biggest obstacles to their plans.

The survey found that while high property prices are a key obstacle for all would-be home movers, other difficulties varied considerably with age. For example, 45-54 year olds cite a poor credit history or credit score (14 per cent) and job/income insecurity among their top three barriers to buying or moving home. For those in the 55-64 and 65+ age brackets, the main obstacle they face is a lack of availability of the type of housing they wish to move to in the area they want to live in.

For younger, first-time buyers the cost of rent remains a major hurdle. Someone paying rent for an average two-bedroom home in England would have forked out £41,196 to their landlord over the last five years, reveals research from Shelter.

This is just £2k less than the sum needed for a 20 per cent deposit on the average first time buyer home, which is currently priced at £216,500, notes the housing charity, which describes the situation as a “rent trap”.

A Londoner paying rent on an average two-bedroomed property would have paid more than £89,000 in just five years, for example, while in five boroughs, including Hammersmith, Islington, and Camden, that cost spirals to over £100,000.

Outside of London, eye-watering sums of rent were found in many of England’s biggest cities. Living in an average rented home in Manchester would have meant paying out more than £40,000 over five years, in Bristol its nearly £48,000, and Sheffield over £32,000.

The figures arrive as Generation Rent continues to grow: indeed, 46 per cent of 25-34 year olds now privately rent, compared to just 24 per cent 10 years ago, according to the official government data.

With housing costs showing no sign of abating, Shelter is calling on the government to commit to investing in homes that people on ordinary wages can afford to rent or buy.

“Our drastic shortage of affordable homes is leaving millions of people stuck in their childhood bedrooms in a bid to save money, or in expensive and unstable private renting with little hope of ever saving for a home to put down roots in,” comments Campbell Robb, Shelter’s Chief Executive.

“You end up between a rock and a hard place because it’s not just rents themselves that are expensive, it’s finding the rental deposit as well,” comments Mike, who rents a flat in north London, and is currently looking at leaving the capital. “With rents as costly as they are, I can’t see how I’ll ever own my own home. At the moment, it feels like nothing more than a pipe dream.”

Commenting on the research Matt Sanders, spokesman for Gocompare.com Mortgages, adds: “There is some good news. Recently there has been a resurgence in the number of lenders offering low-deposit mortgages. Most lenders now have a mortgage product aimed at homebuyers with a deposit of 10 per cent of the purchase price of their property and, subject to stricter eligibility criteria, some lenders offer 5 per cent deposit mortgages.”

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