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First-time buyers priced out of home ownership Matthew Warburton - 25/10/2013

ForSale300Rising house prices were once almost universally seen as good news - and for two thirds of households the comfort of an appreciating asset certainly made it feel that way.  But attitudes are shifting.  Two out of three people now think it would be better if house prices stayed the same or even fell.  Many owner-occupiers are now worried that their children will not be able to buy or find suitable housing for rent given the shortage of affordable homes. 


Research published by Shelter this week shows that they are right to worry. In more than half of areas in England, fewer than one in ten of suitable homes for sale are affordable to a first-time buyer family with one child with an average income.  In London fewer than one in ten homes would be affordable in all but one of the Boroughs.


Shelter's approach was to take a snapshot of the housing market by looking at all the homes advertised for sale on Zoopla on 13 August this year.  They then calculated what proportion of them in each council area could be bought by three types of first-time buyer, assuming a mortgage advance of 80% of the purchase price based on annual income multiplied by 3.33 - based on current lending practice.


The research looked at three types of household: a couple with one child, with one adult in full-time and the other in part-time work; a single adult in full-time work, and a couple without children, both in full-time work.  Each was assumed to be on median earnings for 22-29 year-olds in their area.


Predictably, the results were best for two-earner couples with no children.  In most of the country they would qualify for a mortgage on a fair proportion of the homes for sale - provided they had managed to accumulate a 20% deposit from somewhere.  But not in London or the South East.  In more than half of London boroughs and over a quarter of South-Eastern districts fewer than one in ten available properties would have been within their reach.


For a couple with one child things were much worse.  On the assumption that they would need a property with at least two bedrooms, they could afford fewer than one in ten of the homes available in 55% of areas, including all but one of the London boroughs and over 80% of the South East and South West.  Only in the North East was there no district where less than one in ten homes were affordable.


But a single person seeking their first home faces the worst situation of all.  Needing no more than one bedroom is not enough to compensate for having to rely on just one income.  Fewer than one in ten available properties are affordable to such a buyer in 82% of areas, including all of London and more than 95% of the South East and East regions.


Bear in mind that these are estimates for households on average incomes - not the poorest by any means.  This research provides new and important evidence to bolster the case for action by central and local government to ensure the provision of more affordable homes.

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