buyabetterhome.co.uk

The Scourge of ‘Shameful Shoebox Homes’

http://i.telegraph.co.uk/multimedia/archive/01801/homes_1801424c.jpg

 

The current property market is being labelled the worst time ever to try and get on the property market, but can it really be that bad?  Well it is true that first-time buyers are facing sky high house prices, having to save large deposits to get a mortgage and rigorous credit checks from the banks, but whether they’re any worse off than previous generations is up for debate.  Just days ago the National Housing Federation (NHF) branded our property market ‘totally dysfunctional’, raising fears that home ownership levels will fall to levels not seen since the mid-eighties.

 

So just how much has changed since the 1980s for first-time buyers?  The table below compares the differences between buying a house in 1985 and 2011:

 

1985

http://ecx.images-amazon.com/images/I/51pYSqlilwL._SL500_AA300_.jpg

2011

http://www.qfonic.com/images/products/mar-4882/image01.jpg

House Price

£20,117

£131,731

Bank of England Base Rate

13.88%

0.5%

Typical Mortgage Rate

13.95%

3.91%

Deposit

5%

20%

Household Income

£9,806

£33,313

Monthly Repayments

(As % of Salary)

19%

13%

First-Time Buyers

(In First Half of Year)

278,900

84,000

Age

27

29

 

Apart from just how much houses have gone up in value, the most striking differences between the two eras are as follows:

 

  • The amount of interest payable on the loan is massively less today, than it was in 1985
  • The deposit needed to purchase a house in 2011 is four times greater than that of 1985
  • There are only a third of the number of first-time buyers getting on the market now, then there was in 1985
  • Monthly repayments and ages of first time buyers seem to have remained at relatively similar values

 

Some of these figures haven’t needed 36 years to change; the average home deposit has doubled in just four years to £26,346.  The number of first-time buyers in the first half of the year is somewhat misleading also – if the same table had been drawn up at the beginning of 2007, it would have been a completely different story.

 

Although those buying for the first time in the 1980s had to cope with massive interest rates and therefore had to fork out more of their wage to pay the mortgage every month, they had to save up substantially less for a deposit, and they didn’t have to do it against a background of the highest rents in history.

 

To compound the 2011 first-time buyers’ misery, house prices are predicted to keep going up – simply because there is a chronic shortage of homes.  Last year only £105,000 houses were built, which was the lowest total since the 1920s.  Immigration and family breakdowns are expected to create around 232,000 new households every year until 2033.

 

In summary it would seem that getting onto the market today is substantially harder than it was a few decades ago.  However, once you’ve managed to save that big deposit and finally taken the plunge – thanks to the historically low interest rates – home owners are actually better off in today’s market, even though the cost of property has risen more than twice as fast as wages in the last 16 years.