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Blow for first time buyers - Affordability at its worst for 10 years

Affordability across the housing market is at its worst for 10 years according to an analysis by a London agency.

Benham and Reeves analysed the house price to income ratio based on average property values and the average net salary over the last decade.

The research shows that despite the average net salary hitting £25,123 in 2020, an average house price of £249,633 places the price-to-income affordability ratio at 9.94.

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This means that house prices are now very nearly 10 times the average salary and a minimum of one year’s salary would be needed for the average deposit.

London remains the least affordable location by this measure with a score of 15.74, with the South East and South West regions both on 12.46. 

The North East still ranks as the most affordable region at 6.34, along with Northern Ireland on 6.48 and Scotland on 6.90.

The all-UK’s current house price to income ratio of 9.94 is the highest seen in the last 10 years, having increased from 8.16 in 2011 and exceeding the more recent high of 9.80 in 2017.

Benham and Reeves says the only silver lining in London and the South East is that while they have the highest affordability ratios in the UK, it has been harder for homebuyers in previous years. 

In London and the South East, the house price to income ratio peaked in 2016 at 16.64 and 12.54 respectively.

With the average first time buyer now paying £209,163 for their first home in the UK and earning an annual net salary of £23,643, their house price to income ratio is 8.85.

Like the regular market, this is far higher than in previous years, up from 7.35 in 2012 and the second highest ratio seen since then, beaten only by the ratio of 8.91 seen in 2017.

As per the regular market, London is home to the highest first time buyer ratio at 14.6, while in the North East it is currently just 5.8.

“Although some regions still remain below previous peaks, this new national high demonstrates the huge financial cost of climbing the property ladder in the UK, a cost that grows largest still for those attempting to take their first step” explains the director of Benham and Reeves, Marc von Grundherr.

“Unfortunately, even with stronger wage growth in recent years, earnings have failed to keep pace with house prices and so it’s very likely we could see this issue of affordability grow larger before it starts to reduce.”

  • Andrew Stanton CEO Proptech-PR    Proptech Real Estate Influencer

    Is this Trump fake news? To start with he bank of mum and dad has put a huge amount of cash into property allowing their offspring to get into the property nexus. So this myth of the down trodden, disenfranchised FTB who can never afford to buy and needs special help is just that a myth as parents are stumping up big deposits. Also, if you are a first time buyer in Newcastle, what does a two bed flat cost? £45,000. Is this affordable, with a 5% deposit, or help to buy, £9,000 free for 5-years that flat is now £36,000 of mortgage payments a month, at say 3%, cheap as chips. Not sure what a combined annual salary is in Newcastle is, but I am guessing it is not £3,600 where a 10x's multiplier, gets us to £36,000.
    You see not everyone lives in London, I know it is a shock but 268,000 people live in this one area of the UK alone, the point being yes if you are a first time buyer and you are buying a two bed flat in Chelsea, that is 1.3M.
    Also since 2017, and this may be a bit of a shock – ‘First time buyers buying a property under £300,001 which they live in as their main residence pay zero that is ZERO SDLT – stamp duty to you and me’ so they enjoy a pretty good tax break as well. What is true, and I reported on a week or so ago. is that FTB are having to find an extra 10K as a deposit, due to rampant house price inflation in 2020.

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