The impact of house price increases on first time buyers is highlighted in new research today. The figures from the Joseph Rowntree Foundation show the South West of England and London are least affordable districts for young homebuyers.In the South West, faster than average house price rises, have led to the region moving even higher up the table of areas where young earners find it hard to get a foothold on the property ladder. Four of the five least affordable districts in England – Christchurch, North Cornwall, Torridge and West Somerset – are in the region.
Today’s study compares local earnings among households aged under 40 with the average price in each district for a modest, two or three bedroomed home. Not surprisingly this show home ownership remains most problematic across London but the ratio of house prices to annual income in the South West is close behind and appears worse than the situation in the South East because pay rates are lower and property prices have risen proportionately faster.
The research has taken house price data from the Survey of Mortgage Lenders for the end of 2003. It identifies nine districts where a modestly-sized home costs more than six times the average annual income of local households where wage earners are in their 20s and 30s. The nine are Christchurch, East Devon, North Cornwall, Torridge and West Somerset in the South West, the London boroughs of Westminster and Brent, and the West Sussex districts of Chichester and Adur in the South East.
In 45 other areas, young households would need at least five times their annual incomes to cover the cost of a starter home. Most of these are in London, the South West, South East or Eastern regions but they also include three rural areas that are popular with tourists and second-home owners. Those are Alnwick in Northumberland, South Lakeland in Cumbria and the Derbyshire Dales.
Professor Steve Wilcox of the University of York, who carried out the study for the Foundation, compares his findings with other evidence from mortgage lenders showing that it is rare for loans to be advanced to individuals at ratios of more than 4.1 times their annual income.
Prof. Wilcox said it was clear that affordability issues in the South West have worsened in the past year, relative to London and the South East and that this reinforced the case for the Office of the Deputy Prime Minister to review plans to concentrate increased funding for affordable housing in London and the wider South East. At the same time, he said, the problems highlighted in second-home areas raised questions about the adequacy of government programmes to support the provision of affordable housing in rural areas.
His report, “Affordability differences by area for working households buying their homes – 2003 update” is available free of charge from JRF, The Homestead, 40 Water End, York Y030 6WP.