When the first rung is out of reach

Getting on the property ladder. It’s the dream for many – but, for some, it could remain so. House price affordability is at an all-time low, as highlighted this week in a report by Lloyds, who reveal that the cost of an average UK city home is now a whopping 8.1 times average earnings – the highest it has ever been.

The same report goes on to detail that house prices in UK cities have increased by 10.3% in the year, whilst average earnings for those living in cities rose by just 2.1%.

This will come as no surprise to those living either in rented accommodation or with parents, scraping together enough money for a deposit on their first house (an average deposit being £57,278 across the UK, by the way, and an eye-watering £130,357 in Greater London). For them, the gap between income and house prices has been widening almost every year in living memory.

Put it this way: the average age of a first-time buyer is 34. When they were born, back in 1987, the average house price was just 2.3 times average annual income. Since then, the gap has more than tripled.

Source: UK HPI and ONS

Bemoan the unaffordability of your first home to your parents, and they will likely tell you that it was exactly the same for them ‘in their day’. If that’s the case, please point them in the direction of the graph above; or, if you really need to hammer home the point, here’s the same data cut differently.

Source: UK HPI and ONS

Of course, the key to improving affordability is to increase supply, as well as improving the proportion of housing association units. There was a small chink of light this week when MHCLG announced that housebuilders can now bid on a share of £150m to deliver their latest affordable housing scheme, First Homes.

It is hoped that when this initiative is fully implemented, First Homes should account for at least 25% of all affordable housing; which, looking at the latest data from the ONS, would be around 2,400 units a year.

Meanwhile, whilst waiting for housing supply to improve, many of those who fantasise about being handed the keys to their first home will have to continue to dream. Unfortunately, with house prices rising year on year, that elusive first rung of the ladder seems to be moving ever further out of reach.

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