Is the Property Ladder Broken?

Broken Ladder: 3 years without rent, food, clothing – then you can afford a deposit.

New research out today reveals that the average first time buyer (FTB) would have to save every single penny of their earnings for more than two years to have a chance of getting a foot on the housing ladder. In London it would take three years.

Even over five years, young people have to save almost half of their take home pay every month to save a deposit for a house, with some areas even higher.

The Home Builders Federation has today released a report, entitled Broken Ladder identifying the increasing lack of affordability in the housing market at a time when supply is critically low – last year saw the lowest number of homes built since 1924 – and mortgage availability almost non-existent.

The shocking figures reveal that on average FTBs in their twenties would have to save 45% of their net income every month for five years to afford a deposit for the average starter home. In London and the South-East the figure is even higher with young people in the capital needing to save 60% of their net income to get on the housing ladder.

This means that even if a person in their 20’s was to save every penny for 27 months, they still wouldn’t be able to afford a deposit. In London it’s 35 months.

Because of this, the average age of the unassisted FTB has rocketed to 37, with even those on higher wages in their thirties struggling to buy. It has resulted in more and more people being forced to stay with their parents with nearly a third of men and a fifth of women aged 20-34 now still at home.

The report also reveals that FTBs aged between 22-29, who are privately renting while saving for a deposit, will have just 13% of their monthly net income remaining for council tax, bills and living expenses – for five years.

Stewart Baseley, Executive Chairman, said:

“These figures reveal the extent of our housing crisis. First-time buyers – the life-blood of the housing market – are almost entirely shut out. The lack of mortgage availability is further strangling a market already choking on a lack of supply. We desperately need an increase in lending and a properly functioning and sustainable mortgage market.

“At the same time, the Government must ensure that the new planning policy and incentives they are basing the success of their housing plans on are put in place immediately. Without more houses and more mortgages, young families will be unable to have the security of a roof over their heads and the housing crisis will very quickly reach the point of no return.”

Key Findings

  • Across the UK, first time buyers aged between 22 and 29 have to save 45% of their take home pay every month for 5 years to afford a deposit.
  • In London first time buyers aged between 22 and 29 have to save around 60% of their take home pay every month for 5 years.
  • Across the UK, first time buyers aged between 30 and 39 have to save 35% of their take home pay every month for 5 years to afford a deposit.
  • In London first time buyers aged between 30 and 39 have to save around 45% of their take home pay every month for 5 years.

These figures do not take into account any bills, living expenses or even student loan repayment.

When average private rent is taken into account:

  • First time buyers across the UK who are aged between 22-29 and also saving for a deposit will have just 13% of their monthly net income remaining for council tax, bills and living expenses.
  • In London, first time buyers aged between 22 and 29 cannot pay their rent and save for a deposit – this would cost 10% more than their net monthly income.

The average deposit across the UK is 230% that of average salaries – almost 300% in London.

Broken Ladder

  • The average age of a first time buyer purchasing without financial assistance has now gone up to 37.
  • Nearly a third of men and a fifth of women aged 20-34 are living with their parents.
  • In 2007 first time buyers’ numbers fell to their lowest level for 30 years, they are yet to recover significantly.

A YouGov and Council of Mortgage Lenders survey revealed that the biggest problem in housing is seen as the fact that young people cannot afford to buy, or take on too much debt to do so, cited by 80% of respondents.


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9 Responses to “Is the Property Ladder Broken?”

  1. […] This post was mentioned on Twitter by Mortgage People, Mortgage People. Mortgage People said: Is the Property Ladder Broken?: First-time buyers – the life-blood of the housing market – are almost entirely shu… http://bit.ly/96zuxs […]

  2. Does this take into account inflation?

    If savings are gaining around 0.5% and wage inflation is near 0% but the cost of living is rising by 3% then the amount you can save each month decreases.

    If property price inflation averages even a 3% rate (has been up to 10% in some areas), then the amount you will have to save also raises each year.

  3. God forbid, having to actually save up for something! If people are saving money at some stage of their lives rather than borrowing, the banking system just might be solvent after a few decades. I’m nearly 32, have been saving since I started work, and until the cost of owning vs renting is reasonable and I’ve got my kids into the schools that I want, I’m staying away.

  4. Whenever I read articles about what an “average” FTB buys – I cannot believe they have spent so much! There are plenty of well priced properties in London and the South East.

  5. It’s all just a “catch 22” situation. Nobody can afford to buy and the banks aren’t lending, the sellers cannot sell and so they are not freed up to become buyers…

  6. Good article interesting figures, i think it is right that people are expected to save for a few years to get there mortgage if thats what it takes to get the economy going again, by saving it shows that the owners are serious and stable about there repayments.

  7. As mentioned it is a catch 22 situation. No-body will be able to get on the property ladder with such high deposits required by lenders.

  8. Its not catch 22 its smell the coffee time. No body can get on the so called property ladder because they are over priced. What do you want to happen a load of mad bankers lending 125% mortgages with no proof of income. Come to think of it they did. Lower you house prices and forget this silly bubble happened in the first place. The sellers cant sell, they can if they see sense.

  9. Though I agree with many comments above – borrowing issues etc I don’t think it’s a bad thing for prices to stay stable for a while.

    I think there is too much snobbery in the first time buyer market though – whatever happened to looking in a cheaper area for your investment? There’s plenty of property in Leeds for under £50K which will rent well and put a roof over your head for lower than the cost of renting the same property. Compare a mortgage repayment of £375 to a potential rent of £500 for example…

    I bought my first property at £70,000. It had bars on the windows and door and some little sod nicked my plant pots… but I loved it and it was a great investment. I also think property has been ‘unaffordable’ to FTB’s for a lot longer than the last couple of years – try 8 years. First time buyers: Buy in a cheaper area and rent it if you don’t want to live there yourself! You can rent it out and pay to rent yourself in another area.

    FTB’s just need to be more responsible with their finances but not everyone is capable of doing so and it has nothing to do with earnings. How many people p**s their earnings up the wall on the weekend? I’d argue most of them!

    I’m afraid the average FTB also expects to be in a well off suburb from day one – which isn’t going to happen unless you’re privileged. But 20 years from now they’ll kick themselves for not buying that ‘rubbish’ terrace at £40,000.

    Visit http://www.PropertyParrot.co.uk for property to rent or buy in Leeds.

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