RICS developed an accessibility index (a UK Industry first), which found that the cost of becoming a home purchaser and the ongoing cost of housing are almost the worst for over two decades and will get worse with RICS predicting that house prices will rise by 10 per cent in the next two years.
Over the past 10 years, the rise in house prices has been so pronounced that accessibility is almost 300 per cent worse than in 1996 and currently as low as the weak levels experienced in 1980. A first time buyer couple will now have to save up to the equivalent of 74 per cent of joint take home pay, to build up the £29,200 needed for up front buying costs on a typical home, deposit and stamp duty. This equates to a substantial rise from the low point of 25.2 per cent required in 1996.
Affordability is at the worst levels since 1992 with home owners struggling to service mortgages. A two person household on average incomes would have to spend 22 per cent of their take home pay to service their mortgage, a significant increase from the low point of 14.1 per cent in 1996. Both these factors have pushed first time buyers against a property brick wall.
House prices are expected to cool in 2007 as further interest rates rises take effect with average house prices rising by only 3 per cent, but given the current upward momentum in the housing market, RICS expects the year will end with average house prices 7 per cent above its level at the end of 2005.
RICS economist David Stubbs, said: “Unless house building levels improve, and levels keep pace with population growth and rising income and wealth, people will continue to find it difficult to access the housing market.
“If the housing market is to become more accessible, lenders must continue to offer generous funding levels, and the government should, out of necessity, promote a significant increase in the housing stock. The government must act to create more social housing and tackle the problem of nimbyism in the countryside by building affordable housing for key local workers. The financial pressures of up front buying costs and rising energy prices will continue to create a ‘have – and have not’ property society.”
