Wages need to double to keep up with house prices, says Shelter

Average earners in England would need to see their wage more than double to afford their first home, new research from Shelter has found.

Related topics:  Mortgages
Amy Loddington
11th February 2014
Mortgages

Wages have gone up by around 50% since 1997 while but house prices have soared by more than 200%.
 
According to Shelter, if salaries had kept pace with house price inflation over the last 15 years, the average wage would be more than £55,000 rather than the official £25,932. The gap between wages and property prices is widening as salaries remain static and home values soar leaving average earners needing a £29,000 pay increase to be as well off in relation to property prices as they were in 1997.
 
Worst hit are those in the London borough of Hackney where pay would need to be four times higher than the current average to have kept pace with property.
 
Average earners take home £31,304 in Hackney, but if wages had matched property inflation, the salary would stand at £131,924. In Westminster the gap climbs to £105,375, but workers outside London have also been hit by the double-whammy of effective pay freezes and soaring home prices.
 
People on average wages in Watford and Brighton & Hove would need an extra £47,000 each year to keep up with local house price inflation, while those in Manchester would need to earn £34,000 more.
 

Shelter’s research suggests that there is not a single area in the country where wage and house price inflation have remained aligned.
 
Burnley has the smallest gap, but £10,000 would still need to be added onto the average salary to put it in line with the rise in house prices.
 
Campbell Robb , Shelter’s chief executive, had this to say:

 “When you'd need to more than double your salary just to keep up with rising house prices, it is no surprise that the dream of a home of their own is slipping further out of reach for a generation. Politicians need to start meeting people halfway by committing to bold solutions that will get more affordable homes built.
 
"Otherwise future generations will find themselves priced out of a stable home, however hard they work or save. The reality is that successive governments have failed to build the affordable homes that this country needs, and as a result our housing shortage has reached crisis point.
 
"Despite the fanfare surrounding Help to Buy, pumping money into mortgage guarantee schemes is not the solution. This further inflates prices by increasing demand for an already limited number of homes, and will only make things worse for the next generation of first time buyers.
 
"The only solution is to build more affordable homes."
 
Soaring house prices have left people being forced to take out larger mortgages with the average first-time buyer loan climbing 11.4 per cent in 2013 to reach £122,040.
 
Meanwhile official figures have revealed that more than 3.3 million 20-to-34-year-olds were living with their parents last year in the UK.

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