What is the Real Impact in the Rise in the Housing Market on First Time Buyers?
31 January 2007
There has been no secret made of the fact that UK house prices have risen over recent years, and many home owners have benefited significantly from this. The rise in home values has meant many people have been able to free up cash tied up in their properties whilst sill owning a significant amount of equity to make them comfortable with this. Combined with the relatively low interest rates this has been a dream come true for home owners. The boom has even meant record numbers of people borrowing against their homes to lay down deposits against holiday homes or buy-to-let properties, gaining doubly from the rising market, and having the effect of further fuelling price increases.
Although industry experts don’t seem to be able to decide whether the boom is over or not, and the case can be argued differently depending upon different geographical areas. It would certainly appear that over the last 12 months or so, the growth has in general slowed.
Whilst the boom may have been the best thing that has ever happened financially for existing homeowners and those lucky enough to have bought first and second homes at the right times, it is not so good news for first time buyers. The overall increase in prices has not only increased the average house price in the UK significantly, but it has dragged the bottom end of the market in particular to new heights making that first step on to the property ladder as difficult as ever for first time buyers. The burden is especially difficult for University Graduates who not only face the likelihood of having to move towards the cities to find the right sort of employment, meaning that in many cases they can’t even seek the solstice of a family home for a while whilst they find their feet, they are carrying the millstone of student debt around their necks whilst they do so.
The above statements, I believe are a fair summary of the state of the UK housing market and the problems faced particularly with first time buyers today, but let’s now analyse the facts to see where people really stand in 2007.
Year Average Salary Average Salary
(Population) (22-29)
1997 £16,250.00 £14,336.40
1998 £16,842.80 £16,286.40
1999 £17,503.20 £17,071.60
2000 £18,189.60 £17,799.60
2001 £19,182.80 £19,026.80
2002 £20,004.40 £19,827.60
2003 £20,467.20 £20,098.00
2004 £21,507.20 £18,652.40
2005 £21,985.60 £18,834.40
2006 £22,926.80 £19,224.40
Year Average House Multiple Multiple
Price (Population) (22-29)
1997 £78,199.00 4.81 5.45
1998 £84,396.25 5.01 5.18
1999 £93,609.00 5.35 5.48
2000 £106,960.00 5.88 6.01
2001 £118,604.50 6.18 6.23
2002 £136,635.25 6.83 6.89
2003 £155,226.25 7.58 7.72
2004 £178,136.25 8.28 9.55
2005 £188,565.75 8.58 10.01
2006 £192,831.33 8.41 10.03
Source:
Average salary figures taken from www.statistics.gov.uk
Average house price figures 1997-2005 taken from www.proviser.com and 2006 figures from www.communities.gov.uk (figures are averages of all completed sales during the stated time period).
In 1997 the average house price in the UK was just over £78,000 with an average salary of £16,250 for the general population, and £14,336 for 22-29 year olds – typical first time buyers. The average house price in 1997 was therefore 4.81 times the national average salary and 5.45 times the average salary of a 22-29 year old. A 10% deposit for a 22-29 year old on the average salary buying an average house in the UK would have represented 54.5% of a year’s gross pay. Although clearly a struggle, the prospects of couples in particular finding their way onto the housing market was good.
Looking at the same comparison for 2006, the average UK house prices was just under £193,000 – an increase in 10 years of 147%. The average salary for the UK population had also increase to just under £23,000, and increase of 41% and to just over £19,000 for our 22-29 year o
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