First-time buyers hit hard in London

New research from housing charity Shelter has found that first-time buyers in London are paying as much £140,000 more for their home than if house prices had risen in line with wages.

House prices are now ten times the average annual salary, compared to five times annual income 15 years ago. While the rest of the country is also affected, as buyers in Yorkshire are paying an additional £47,000 and those in the South East £74,000, it is clear that London is the hardest hit. The average extra cost across England is £77,000, almost half that of the capital.

The charity’s 'Affordability of housing for first-time buyers' report calculated that the average house price in London if property prices were proportionate to wages would be £199,854.

Shelter chief executive Campbell Robb said: “When wages and house prices are so out of sync that first-time buyers are having to pay tens of thousands of pounds more for a foot on the ladder, it‘s a clear sign that our housing market is out of control.”

He also warned that young adults and families could end up living with their parents well into their 30s if action was not taken.

Unsurprisingly, the latest figures from the government’s English Housing Survey show that homeowning is at its lowest level for 29 years. At present, only 63 per cent of homes are classed as owner-occupier. The group least likely to own their own home was people aged between 25 and 34. Nearly half (48 per cent) of this demographic lived in rented accommodation during 2013/14, avoiding the high price of houses.

Furthermore, over the past ten years, owner-occupier status in the 25-34 age group has fallen from 59 per cent to 36 per cent.
A lack of housing is generally believed to be the main reason for the continuing rise in house prices. Housebuilding is currently at its lowest peacetime levels since the 1920s, according to Labour’s shadow housing minister Emma Reynolds.

Published 9th March, 2015

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