First time buyers will need £64,000 salary to afford an average home by 2020, warns Shelter
Posted 14 Apr 2016
Typical first time buyers will need to earn £64k a year by 2020, new research by
housing and homelessness charity Shelter shows. This is an increase of nearly a fifth on the £52k needed for a typical first time buyer's mortgage today.
On top of this they would need a deposit of £46,000 to keep up with rocketing house prices, which are projected to rise to £270,000 over the next four years.
The research looked at the salary and deposit needed for the average first time buyer today, and calculated what they would be in 2020 if they grew in line with projected increases in house prices.
These figures come as no surprise given that, over the last five years, the country's severe housing shortage has seen house prices rise six times faster than wages.
Campbell Robb, Shelter's Chief Executive, said: "When house prices are increasing six times faster than the average wage, it's no wonder people on ordinary incomes are being locked out of a home of their own.
As the Government's Housing Bill passes through the House of Lords, Shelter is warning that, unless the government commits to building homes that people on ordinary incomes can actually afford, the situation is only likely to get worse.
"With the situation only set to get worse, Generation Rent will be forced to resign themselves to a life in expensive, unstable private renting, and wave goodbye to their dreams of a home to put down roots in.
"It doesn't have to be like this. The Government has the power to turn our housing crisis around, but only if they stop with schemes like Starter Homes which only help higher earners, and start investing in homes that people on ordinary incomes can actually afford to live in."
Case Study: Mike, a nurse, is currently renting and has had to move because of high housing costs.
"On a nurse's salary and with house prices so high, I can't see how I'll ever own my own home. At the moment, it feels like nothing more than a pipe dream.
"I'm stuck renting and looking at moving away from where I currently live because rents have gone up so much as well. It just seems so unfair – if you work hard, you should be able to afford a place to call home."
Notes to editors:
Shelter has been helping people fight bad housing and
homelessness for 50 years. For free and independent advice from Shelter visit shelter.org.uk/advice or call the
helpline on 0808 800 4444.
Projections that the salary needed to afford an
average home by 2020 will be £64,000, with a £46,000 deposit, and the average
UK house price reaching £270,000, are based on Prof Paul Chesire's
recent projection that UK house
prices are expected to increase by 23% by 2020. This analysis assumes that:
An average mortgage is taken out for an average first
time buyer property
Average mortgage advances and loan to income ratios
remain the same in 2020 as they were in 2015
Two data sets were used to calculate and compare the
growth in house prices and wages between 2010 and 2015 by region, which you can
find in the table below.The typical salary
is the median salary for full-time workers, as reported in the Annual Survey of
Hours and Earnings (ASHE) which you can find hereThe average house price is the mix-adjusted first-time
buyer average from the latest ONS House Price
Index tables.This ties in with the latest forecast from the Office
for Budget Responsibility (OBR) projecting a 26.4% rise in house prices by 2021.The latest projections
from the Town and Country Planning Association revealed that we need to
build 312,000 homes per year in England. This is 2.7 times the 114,236 built on
average over the last five years, according to DCLG statistics.
Regional breakdown of house prices versus salaries in
order of expense
| Region | House price:wage growth 2010-2015 | Current average FtB price | Current median full-time salary | Estimated FtB price in 2020 | Income needed by 2020 | Deposit needed in 2020 |
|---|---|---|---|---|---|---|
| UK | 6 | £220,000 | £27,600 | £270,000 | £64,000 | £46,000 |
| London | 15 | £419,000 | £33,200 | £558,000 | £106,000 | £138,000 |
| South East | 8 | £257,000 | £30,100 | £316,000 | £66,000 | £61,000 |
| East | 5 | £227,000 | £29,300 | £279,000 | £63,000 | £51,000 |
| South West | 3 | £193,000 | £26,500 | £236,000 | £51,000 | £47,000 |
| West Midlands | 3 | £155,000 | £25,700 | £183,000 | £46,000 | £28,000 |
| East Midlands | 5 | £147,000 | £25,600 | £175,000 | £44,000 | £27,000 |
| Yorks & Humber | 4 | £139,000 | £25,100 | £164,000 | £44,000 | £25,000 |
| North West | 3 | £141,000 | £25,700 | £165,000 | £44,000 | £25,000 |
| North East | 2 | £122,000 | £25,200 | £142,000 | £40,000 | £21,000 |