Home Property Houses 'becoming increasingly unaffordable'

Houses 'becoming increasingly unaffordable'

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17th Aug 12 8:45 am

House prices in England rocketed at three times the rate of the average worker’s salary in the last decade, according to a study by an industry body.

The typical price of the average house was £121,769 in 2001 while the average salary was £16,557, according to the National Housing Federation.

But 10 years on, the average home now costs £236,518, a 94% increase, despite the housing market being sluggish in recent years.

Wages have gone up by just 29% to £21,330 in the same period of time resulting in homes becoming increasingly unaffordable, the federation says.

Frustrated home buyers have instead been forced to remain on the rental market. A separate study from LSL Property Services shows that average rents reached a record high of £725 a month across England and Wales in July.

The ratio between average house price and salary in 2001 was 7.4 across England, but this had gone up to 11.1 by 2011, the study said.

The study found people have been finding it a lot more difficult to save up for a mortgage. In 2001 the deposit for a typical 90% mortgage was £12,177, roughly nine months of a typical salary.

Borrowers with smaller deposits are struggling to get a mortgage amid the uncertain economic times and the federation believes people are now more likely to need a larger deposit.

The deposit needed for a typical 75% last year was £59,129, nearly three years of an average salary.

National Housing Federation chief executive David Orr said: “These shocking figures show that it is getting increasingly harder for millions of people to buy a home of their own in the current climate.

“With the gap between income and house prices growing ever wider, people can often feel like they have to win the lottery to be able to buy in their local area.

“A shortage of homes means the price to buy them is being pushed ever higher by the market, and out of reach of millions of hard- working families.

“Unless we start building more homes people can truly afford to match the demand, this will only get worse.”

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