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Young people are finding it even harder to get onto the property ladder with the news that the average salary requirement has risen by 18% over the last three years in some cities. In fact, first-time buyers need an average £53,000 salary to buy a home in the UK’s 20 largest cities.
Research company Hometrack has carried out research into the affordability of property for first time buyers, and one of the findings was that only three out of 20 major cities has become more affordable since 2015.
The cities with the biggest drop in affordability in the past three years were Bristol and Manchester. This is a result of where rapid growth in house prices had pushed up the average wage needed by a first-time buyer by almost a quarter.
A first-time buyer in Bristol now needs to earn £58,826 per year in order to afford the average property, while three years ago they would need £47,283. In Manchester the salary requirement of those wanting to get onto the property ladder has jumped by more than £6,500 to £34,770. London is still too expensive for many young first-time buyers, with the study showing that £84,250 was the average income required to buy an average property.
In addition, it has become harder for first-time buyers to buy a property in Leicester, Birmingham and Nottingham, with home values rising by more than the rate of growth in earnings over the past three years.
It is believed that over 30% of young people may never own their home and could be forced to live and raise families in insecure private rental accommodation throughout their lives. The Institute for Fiscal Studies also said the chances of a young adult on a middle income owning a home in the UK had halved in the past 20 years.
Although wages have risen just above the rate of inflation, property values have risen at a much faster rate. There has been a slowdown and drop in London, but most of the country has seen values rise by more than 3% each year, and in Scotland this is even higher as demand continues to outstrip supply.
Property in the north-west has seen annual increases of about 5.6% and properties in the south-west and West Midlands rising by about 4.4%. In contrast, the annual increase in average weekly pay was 2.9% in the UK.
In London, Cambridge, Oxford and Aberdeen, affordability has improved slightly where the average income needed to buy a home has risen by 1% in the past three years.
Higher interest rates could make it harder for more people to buy a home, while there were also affordability caps imposed on mortgages to stop banks lending to people who may find it difficult to repay their loans.
If you would like advice on buying a property for the first time, contact Derngate Wealth today.