Frederick Jorgensen - Estate Agency Consultant
Research by homelessness charity Shelter has uncovered that over the next four years the average deposit a first time buyer will need for a home within the capital could exceed £138,000. It was also reported that in order to get a mortgage in London, a single or joint income will have to equate £106,000 by 2020.
This combined income seems unobtainable for most of those working in London as Payscale research featured on Monster shows that the average income for those working in London currently lies at around £34,730.
The charity gathered their data using representative deposit prices, academic research, average mortgages and current house prices. Through these statistics it was found that over the last five years, the cost of owning a house for first time buyers has increased six times quicker than wages. One of the biggest disparities lies in Westminster, where the average house prices have risen by 67% while the typical wages of those living in the area have dropped by 7%.
The divide between house prices and wages means it’s only getting harder for first time buyers. However, it’s not just London that’s affected, prices throughout the UK are set to increase. The overall rise in costs means that those looking to break away from ‘Generation Rent’ are unable to do so and forced to remain privately renting, which can be expensive and potentially unstable.
Campbell Rob, Chief Executive at Shelter commented on the study and the potential effect London’s market is having on those trying to get a foot on the property ladder:
“When house prices are increasing fifteen times faster than the average wage, it’s no wonder Londoners on ordinary incomes are being locked out of a home of their own.
“With the situation only set to get worse, Generation Rent will be forced to resign themselves to a life in expensive, unstable private renting, and wave goodbye to their dreams of a home to put down roots in.
“It doesn’t have to be like this. The next Mayor of London has the power to turn our housing crisis around, and with only weeks before Londoners go to the polling booth, the candidates must commit to investing in homes that people on ordinary incomes can actually afford and make renting more secure.”
These findings arrive as London renters have been venting their frustrations towards the condition they are forced to live in while privately renting using the hashtag ‘#Ventyourrent’
Figures from the Office of National Statistics revealed that by the end of 2014, 1.2 million people between the ages of 31 and 35 were still privately renting. This figure has more than doubled since 2007, when the recession first started.
However, it’s not just London which is seeing the cost to get onto the property ladder increase. Across the country Shelter forecast that first time buyers will need to raise a deposit of £46,000 as house prices are forecasted to rise to £270,000 by 2020.
As demand for housing continues to rise, the government have dedicated themselves to delivering 200,000 starter homes that will include a 20% discount for first time buyers to attract more people away from renting and into homeownership. However, as house prices are predicted to reach such heights in the next four years there are calls to increase investments into solving the capital’s housing crisis and making renting more secure for tenants.