Unaffordability of homes for first-time buyers

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Soaring house prices have resulted in parts of the UK becoming almost completely unaffordable to first-time buyers, according to a new study.

The Priced Out report, from Post Office Money Mortgages, explores affordability of properties across the country for first-time buyers and how this has changed over the past 20 years.

The findings reveal that a third (36 per cent) of homes in the UK – equivalent to 5.5 million properties – are now in areas where the average home is unaffordable for those looking to take their first steps on the property ladder.

This is a trend that is getting worse, with hundreds of neighbourhoods falling out of reach over the past 20 years.

In the North East, the average house price in 2015 was £165,915, while the average income for first-time buyers was £37,484 – an affordability ratio of 4.43.

Since 1995, average houses prices in the North East have gone up by 256 per cent, but the average incomes of first-time buyers have only risen by 142 per cent.

However, the situation in the region has improved since 2010 when the affordability ratio was at its highest during the past two decades. Plus, compared to 10 years ago and five years ago, average first-time buyer incomes have increased more as a percentage than average house prices.

In 1995, 93 per cent of properties in Newcastle were affordable to first-time buyers, but by 2015 this had dropped to 76 per cent.

Having said that, this figure is far healthier than in the likes of London (41 per cent) and Brighton (just nine per cent).

The Priced out study also reveals the lengths to which first-time buyers are willing to compromise with almost nine in 10 (87 per cent) first-time buyers admitting they had to lower their expectations.

John Willcock, head of mortgages at Post Office Money, said: “These figures highlight the challenges facing today’s first-time buyers.

“Many would-be buyers are having to compromise on their housing needs in order to take that all-important first step onto the ladder. For some, this is a case of prioritising what is really essential in a home, but for others this means significant changes to their lifestyle, moving further away from work, family and friends.

“The earlier people start to plan and save for the future, the closer their housing reality is likely to be to their goal.”