Mortgages  

‘FTB affordability at crisis point’: KPMG

‘FTB affordability at crisis point’: KPMG

There is an increasing gap between average earnings and the minimum income needed for house purchases in the UK, research by consultancy KPMG has warned.

According to Jan Crosby, head of housing at KPMG, government action is needed to build new homes, unlock public sector land banks, boost small and self-builders, empower towns and cities to build the homes they need, and increase investment in affordable homes.

Mr Crosby said: “These figures make for frightening reading and show that housing affordability is no longer just a problem for lower wage earners. Now, unless you earn well above average or receive an inheritance, it is unlikely you will be able to afford to buy, no matter where in the UK you live.”

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The research, compiled from ONS data for 2014 showed that prices have risen to the point that a first-time buyer in London needed a yearly salary of £76,971 just to get onto the property ladder.

However, the actual annual average salary in the capital is £27,999. The picture was little better elsewhere, with the annual salary needed in the UK being £40,553, while the national average salary is £22,044.

The affordability calculation was based on a 10 per cent deposit and the remaining 90 per cent being borrowed at 4.5 times annual salary.

Opinion research conducted by KPMG during March and April 2015 showed that 69 per cent of people felt there is insufficient affordable housing, while 30 per cent worried about being able to continue to pay their mortgage or rent.

Meanwhile, 72 per cent of 16 to 17 year olds wanted to buy within 10 years, with 58 per cent of people now viewing property ownership as an established part of retirement planning.

Jeremy Duncombe, director for Legal & General Mortgage Club, said: “It is no surprise that house price rises are outpacing the growth of salaries.

“The supply of housing is not keeping pace with demand which is pushing prices up in contrast to salaries which are rising at a much slower rate. This imbalance means that first-time buyers will struggle to save up a big enough deposit to buy a house, a problem which is particularly acute in London.”

Adviser view:

Rebecca Aldridge, managing director at Nottingham-based Balance: Wealth Planning, said: “Property is seen as an investment, but we have to question whether the yields we are seeing are sustainable in the long term.

“If anything, a sensible policy shift might be to discourage use of property as an investment. Loans on property are seen as tax efficient because you can offset the mortgage interest against rental profits. Removing this would make such investments less attractive.”