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Quarter of households 'unable to afford their own homes'

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Quarter of households 'unable to afford their own homes'


Published by webmaster for in Housing

Quarter of households 'unable to afford their own homes'

One in four households are unable to afford to buy their own home due to soaring property prices and rising interest rates, a report showed today.

Just under a quarter of young working households have little chance of buying even the cheapest property in their local area, increasing to 50% in the worst-affected places, according to Professor Steve Wilcox of the University of York.

He said high house prices and rising interest rates were increasingly pricing people out of the market, with London and the South West the least affordable areas of the country.

The research, which used data from property information group Hometrack, compared the incomes of working households with local house prices across Great Britain.

It found that in many areas of the country first-time buyers would need to borrow more than five times their household income to get on to the property ladder.

At the same time there were only a handful of areas where house prices were less than three times average household incomes - the traditional multiple that mortgage lenders will advance.

London is the worst-affected region with the average cost of a two to three bedroom room property in the capital more than five time average household earnings at the end of last year.

But the South West was also badly affected with property costing around 4.8 times local household earnings, while in the South East house prices were nearly 4.7 times greater than local pay.

Overall there were 40 local authority areas where house price to income ratios were greater than 5.5, and just 19 areas where property cost less than three times earnings.

Kensington and Chelsea in London was the least affordable area, with a house price to local household income ratio of 9.23, while eight other local authorities in the capital had ratios above 5.5.

Sixteen of the least affordable areas were in the South West, with house price to income ratios ranging from 6.96 in Christchurch to 5.58 in West Devon.

Prof Wilcox found that 34% of working households in the South West would be unable to buy even the cheapest property in their region, while 32% of people in London and 30% in the South East were also priced out of the market.

Scotland is the most affordable area of the country, with just 16% of young working households there unable to get on to the property ladder.

He added that in Kerrier in Cornwall 53% of young households could not afford to buy their own place, while just over 50% were priced out of the market in both Penwith in Cornwall and in South Buckinghamshire.

The report also found that in England and Wales renting was considerably cheaper than buying, representing less than two-thirds of the costs of house purchase.

Prof Wilcox said: "Not too long ago there was little difference between the costs of buying and renting, but while house prices tripled in the years since 1994, private sector rents only increased in line with earnings, and the costs of renting have as a result fallen relative to the costs of buying."

A spokesman for the Department for Communities and Local Government said: "These figures show how important it is for councils, communities and housebuilders to back plans for three million more homes by 2020.

"The long-term rate of housebuilding hasn't kept up with rising demand, causing long-term house prices to increase.

"The level of new housebuilding is at its highest since 1990, but we need a national consensus on building more homes. Those who are still opposing new homes need to face up to the unfair consequences for first-time buyers and young families who badly need new affordable homes."

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