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Property buying costs hit new high

Getting onto the housing ladder is the hardest it has been for 17 years. UK property is now 350% less affordable for first-time buyers than it was in 1996, when getting on to the property ladder was at its easiest, the Royal Institution of Chartered Surveyors (RICS) said.

The RICS says the continuing strong price growth and five interest rate rises in the past year are to blame. A first-time buyer couple with total take-home pay of £25,899, would now have to save up the equivalent of 90% of their annual post-tax earnings, or £25,600, for a deposit, the group said. At the same time, a couple on this income would have to spend 44% of their take home pay on a mortgage, only 4% less than the record of 48% reached in 1990.

Unsurprisingly, London is the most difficult place for a lower-earning couple to get on to the property ladder, where 100% of their income is required for a deposit. However, in certain areas of the North, RICS says that couples need ‘only’ save73%of their combined income to access the market.

RICS’s David Stubbs said: “First-time buyers are facing an enormous struggle to access the housing market. “This may worsen if the turmoil in the US market forces mortgage providers to tighten lending criteria and demand even higher deposits. “Even if prospective first-time buyers make it onto the market, they face mortgage payments which take up a higher percentage of their take home pay than at any time since 1990.”

But he added that affordability pressures may be nearing their peak, with house price growth expected to be below earnings growth in 2008, while interest rates may also start to fall next year.

This was posted in Bdaily's Members' News section by Ruth Mitchell .