The gap between average earnings and first-time buyer salaries has now hit a post-recessional high.
What’s the latest?
Home ownership has become "more and more exclusive" as the gap between average earnings and the salaries of first-time buyers soared to a post-recession high.
People taking their first step on to the property ladder earned an average of £38,997 in 2015 – a staggering 41% more than the average UK income of £27,645, according to mortgage insurer Genworth.
The gulf is more than double the 17% difference seen between the salaries of first-time buyers and average earners in 2000.
Why is this happening?
The current shortage of homes has put upward pressure on property values and led to recent strong house price growth.
But wages have failed to rise at the same rate as property prices, causing affordability to becoming increasingly stretched.
At the same time, tighter lending multiples and strict affordability criteria under the Mortgage Market Review are making it harder for those on lower earnings to get on to the property ladder.
Who does it affect?
"...our analysis suggests home ownership is in fact becoming more and more exclusive.”
The fact that first-time buyers now need to earn above-average salaries to get on to the property ladder is bad news for most people hoping to buy their first home.
It suggests that people will have to wait longer before they can purchase a property, as they will have to climb up the career ladder first.
Genworth said the research also indicated that many people were now unable to buy a home without the help of a partner, family member or government scheme.
Sounds interesting. What’s the background?
The typical salary a first-time buyer needed to get on to the property ladder last year was higher than average earnings in ALL regions of the UK apart from Northern Ireland.
By contrast, in 2000 only first-time buyers in London, the south east and the south west earned more than average.
Affordability levels are worst in the capital, where people getting on to the property ladder typically need to earn 65% more than the average worker.
Over the past three years, the amount first-time buyers across the country have been paid has risen at three times the rate of average earnings, suggesting home ownership is increasingly becoming the preserve of those with higher incomes.
Simon Crone, vice president for mortgage insurance - Europe at Genworth, said: “Even though the first-time buyer market appears, on the surface, to have recovered since the recession, our analysis suggests home ownership is in fact becoming more and more exclusive.”
Top 3 takeaway
- The gap between average earnings and the salaries of first-time buyers has soared to a post-recession high.
- People buying their first home earned an average of £38,997 in 2015 – 41% more than the average UK income of £27,645.
- The gulf is more than double the 17% difference seen in 2000.
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