Monday 20 August 2012

HOUSE PRICES RISE THREE TIMES AS MUCH AS INCOMES OVER DECADE

The cost of buying your own home in England increased by more than three times the rate of an average salary over the past ten years. National Housing Federation research found that in 2001 the average price of a home was £121,769, and the average salary was £16,557. In the space of ten years, the price of a home has rocketed to £236,518 – an increase of 94% - whereas wages have risen just 29% to £21,330. Saving for a mortgage has also got a lot harder with the amount of deposit needed to get a mortgage rising by 386%. In 2001 the deposit for a typical 90% mortgage (available in 2001) was £12,177, about nine months salary. By 2011 the amount banks were willing to lend was less, and so the deposit needed for a typical 75% mortgage leapt to £59,129, almost three years salary. In 2001 the ratio between average house price and salary was 7.4, but by 2011 that had risen further to 11.1. Regional variations show even greater gaps. David Orr, chief executive of the National Housing Federation, said these figures show that it is getting increasingly harder for people to buy a home of their own in the current climate. “With the gap between income and house prices growing ever wider, people can often feel like they have to win the lottery to be able to buy in their local area,” said Mr Orr. “A shortage of homes means the price to buy them is being pushed ever higher by the market, and out of reach of hard working families. Unless we start building more homes people can truly afford to match the demand, this will only get worse.” Adam Offer, managing director of leading Bristol and Gloucestershire estate agents Besley Hill, said: “The housing market is actually a lot better than is widely reported, The main problem is that there are not enough properties coming onto the market. At the moment there are a lot of people who have been in rented accommodation for a while. They’ve been waiting to buy in the hope that house prices would drop lower than they have. But the reality is that, in this area, the majority of prices have remained fairly stable. Figures from the Land Registry show that for the south west prices have actually gone up by 1.2 per cent in the last 12 months, and first time buyers are few and far between. Mortgages are available, but deposits have to be big to take advantage of the best rates. There are some high loan-to-value deals out there, but it’s whether you can afford the repayments. Some people are getting more inventive with the ways they find the money. For example, parents are taking equity out of their own homes so that their children can get on the housing ladder. Some are also using inheritance from their grandparents, and others are taking advantage of the Government’s new build scheme. I think this scheme was quite ill-conceived, though, because a lot of new builds are priced far too high and then are hard to sell.”