House prices in the UK have continued to stretch further away from the reach of millions of workers, a new study confirmed today.
Research from the National Housing Federation shows that house prices have risen three times as much as average incomes over the last ten years.
In 2001 the average price of a home stood at GBP121,769 and the average salary was GBP16,557. A decade later the price of a home had shot up 94% to GBP236,518, while wages rose just 29% to GBP21,330. The result is that buying a home has become increasingly unaffordable for many people.
To make matters worse, saving for a mortgage has become harder as the amount of deposit needed to get a mortgage has risen by 386%. In 2001 the deposit for a typical 90% mortgage was GBP12,177, corresponding to about nine months’ salary. By 2011, after the financial crisis, banks were generally less willing to lend 90% of the price and the the deposit needed for a typical 75% mortgage had ballooned to GBP59,129, almost three years’ salary.
At the same time the cost of renting has increased, a letting group said today. LSL Property Services plc, which owns a letting agent network that includes national chains Your Move and Reeds Rains, reported that the average rent paid by private tenants in England and Wales had reached a new record high of GBP725 a month in July.
Average rents rose by 1% compared to June and were 2.9% higher than a year ago, fuelled by strong demand for rented accommodation due to the growing number of people unable to get a mortgage.
Housing charity Shelter has called for government action to increase house building in order to address the housing crisis, after official figures released yesterday revealed a 24% decrease in the number of new homes started. Only 21,540 new homes were started by builders in the three months to June 2012, down 24% from the same period a year ago and a 10% decrease from the first three months of the year.
Shelter’s chief executive Campbell Robb said: “With a flatlining construction sector, building significant numbers of new, genuinely affordable homes would create jobs and stimulate the economy. More importantly, it would send a clear message to the millions of people priced out of homeownership or struggling with high housing costs that the government is on their side.”