New research by estate agent Coulters has revealed that average house prices in the UK have risen by 300% over the past 20 years, but average incomes have only increased by 70% over the same period. The report outlines how difficult it is for first-time buyers to get on the property ladder.
In 1999, the average price of a house in the UK was just £77,961. This figure has now effectively tripled to £230,735. What’s worse, even though average incomes are increasing, the difference is only £17,803 to £30,353 a year. In London, skyscraper prices have increased by an average of £365,958.33 since 1999, a staggering 316.34% increase in just 20 years.
The widening gap between home prices and incomes has subsequently increased the cost of down payments. In 1999, a 10% down payment on a home was equivalent to about 43.8% of the average salary. However, by 2019 the average down payment amounted to around 76% of annual income, showing that the UK housing market is becoming increasingly unaffordable for first-time buyers.
Analysis by the Office for National Statistics (ONS) published last year found that the UK’s average full-time salary in 2019 was £36,611, slightly higher than Coulters’ estimate, but still the average house price was £230,735. It was well below the pound. Standard deposits currently amount to around 76% of average incomes, costing the average buyer around £27,824.36 to put down a deposit, which is a large sum of money and prohibitive for many young people. The amount may be out of your reach.
Coulters’ report concludes with a sobering reflection on London’s housing market. The average amount needed to put a 10% down payment on a house has jumped from 51.4% of a Londoner’s average salary to 120.9% over the past 20 years.
Last week, Chancellor of the Exchequer Rishi Sunak announced a ‘stamp duty holiday’ for UK property as part of his long-awaited mini-Budget. Zoopla (LON:ZPG) analysis outlines how the scheme would increase the total number of UK homes eligible for stamp duty exemption from 16% of total sales to 89%, an increase of 73% However, this move is likely to benefit. The number of first-time buyers is the lowest.
Commenting on the Prime Minister’s proposals, British investor journalist Jamie Gordon said:
“While this serves the obvious purpose of boosting economic activity, by making it easier for speculators to add to their portfolios, it may actually make it more difficult for first-time buyers to get on the ladder. .”
With Brexit looming this autumn and after several arduous months during the coronavirus lockdown, 2020 is shaping up to be a turbulent year for the UK housing market. Home prices rose 1.3% in January, but prices fell during the peak of the pandemic. This is the third consecutive month of decline, and even with the Chancellor’s new stamp duty system, it is likely to take some time for the market to fully recover.
Howard Archer, principal adviser at economic forecasting firm EY Item Club, said in June that house prices would decline in the coming months, driven largely by job uncertainty as the government prepares to end the furlough scheme in October. I expected it to fall 5%.
“Housing market activity is likely to be limited in the short term…Many people have already lost their jobs despite government support measures, while others will remain unemployed even when the furlough scheme ends. Some people may be worried that this will happen.”
