How much do you need to earn to buy a home? It ranges from £24k to £97k

A ‘chronic shortage’ of homes for sale in Britain’s cities has helped to push house prices up in urban areas by more than 10 per cent this year. It means buyers need to earn significantly more than a typical wage before they can own a city home.

New figures suggests that out of 20 major cities in Britain, the average household income needed to afford a home with a typical 76 per cent mortgage is £49,700, up from £45,000 a year ago.

But the range is significant – from less than the average wage at £24,000 in Liverpool, to a staggering £80,200 in Oxford and almost £100,000 in London.

UK MapThe research by Hometrack found those buying in Liverpool need a smaller deposit at £26,500, compared to £88,700 in Oxford and £108,000 in London.

The weakest rate of growth has been Aberdeen, where average house prices have dropped 2 per cent following a 12 per cent increase the previous year.

The city with the strongest turnaround in the past year has been Glasgow, where growth has jumped from 1.8 per cent to 8 per cent as prices recover from a relatively low level in one of the most affordable cities covered by the research.

Hometrack blamed a lack of supply, created by strong demand from investors along with a low number of existing homeowners who are moving. The latter group accounts for 33 per cent of housing sales today compared to 50 per cent in 2007.

Richard Donnell, director of research at Hometrack, said: ‘The scarcity of homes for sale looks set to remain a feature of the market in 2016. This will only ease once we see greater levels of output from home builders and renewed activity among existing mortgaged homeowners.

‘Questions about the sustainability of house price growth are being raised as house prices accelerate on growing scarcity and lower sales volumes, especially in the high growth markets such as London.

Wages & depositsHowever, there is a glimmer of hope for buyers as investor demand weakens next year, Hometrack predicts. This will be due to the changes in stamp duty rates for second homes and the tax relief changes for landlords.

Mr Donnell added: ‘Assuming the first interest rate rise is in the second half of 2016 then we expect 7 per cent growth in city level house prices over 2016 with housing transactions broadly flat. This is based on a slowdown in growth across London as affordability pressures and lower investor demand ease the upward pressure on house prices.

‘Earlier and faster rate rises than those assumed by the market would reduce the scale of house price growth as they would further impact investor demand and mortgage affordability.’

The Bank of England is widely expected to raise interest rates in the second half of next year from the historical low of 0.5 per cent as the economy improves.

Brad Bamfield, CEO of Joint Equity says “buying with Joint Equity means your deposit is lower at 5% of house price as a minimum and we use your ability to pay rent as the affordability factor. So if you have paid rent for 12 months or more we will support you up to £100 per month more than that rent.”

This means most people who can afford to rent can afford to buy with Joint Equity.

Article source This Is Money, full article here.

Rents rising faster than house prices – a good time to buy with Joint Equity

graph increaseHouse prices will rise by 6 per cent next year, according to the Royal Institution of Chartered Surveyors, but renters will lose out the most to inflation.

Tenants are set to see the cost of renting a home rise faster than their incomes and faster even than house price growth, RICS suggests rents could rise by five per cent a year.

Next year, house prices across the UK are expected to climb by an average of six per cent and will ‘outstrip any commensurate rise in household incomes’, RICS forecast.

Northern Ireland and London could see prices climb by 5 per cent next year, while the South East and West Midlands could see hikes of 7 per cent

The Office for Budget Responsibility had predicted that house prices would rise 5 per cent year-on-year until 2020.

This is because the surveyors expect demand for homes to continue to outstrip supply going into the new year.

Northern Ireland and London could see prices climb by 5 per cent, while the North West, Wales and Yorkshire and Humberside could see a rise of 6 per cent.

In the North East, house price growth is expected to be more modest than the national average next year, with prices rising 3 per cent, RICS said.

Other regions, including Scotland and the East Midlands are predicted to see house price growth of 4 per cent next year.

East Anglia prices are predicted to lead the way with an increase of 8 per cent next year, while the South East and West Midlands could see 7 per cent price hikes RICS said.

These are predictions based on factors such as lack of supply and the impact of government initiatives.

rent or buy 2Should house prices continue to rise faster than average incomes, aspiring first-time buyers will find it even tougher to get on to the property ladder in the new year. The problem would be compounded if rental costs continue to rise at an even faster pace as tenants will have to spend a greater proportion of their incomes on housing costs and will have less to put away towards a deposit.

Simon Rubinsohn, RICS’s chief economist, said: ‘Housing has clearly leapt up the Government’s agenda, but despite the raft of initiatives announced over the past year, the lags involved in development mean that prices, and for that matter rents, are likely to rise further over the next 12 months.

‘Lack of stock will continue to be the principal driver of this trend but the likely persistence of cheap money will compound it for the time being.

‘Looking further out, there is some justification for taking a more optimistic view of new build with significant incentives being put in place to deliver starter homes.

‘While this may not on its own stem the upward trend in house prices, it could help to slow the rate of growth to something closer to the probable rise in household incomes.

‘Critically our principal concern with the measures announced by the Government is that they are overly focused on promoting home ownership at the expense of other tenures.

‘Discouraging Buy to Let could see private rents take even more of the strain if institutional investment doesn’t increase significantly, particularly given the likely reduced flows of social rent property going forward.’

Brad Bamfield, CEO of Joint Equity says “buying with Joint Equity means your deposit is lower at 5% of house price as a minimum and we use your ability to pay rent as the affordability factor. So if you have paid rent for 12 months or more we will support you up to £100 per month more than that rent.”

This means most people who can afford to rent can afford to buy with Joint Equity.

46% of First Time Buyers consider Shared Home Ownership

percentage 2Almost half (46%) of first time buyers are considering turning to shared equity and shared ownership schemes to enable them to buy their first home, according to research from Lloyds Bank.  

Of these, one in four (26%) said affordable housing schemes were their only option for getting onto the property ladder and they would not be able to buy a home otherwise.

One in four (24%) said it allowed or would allow them to buy in an area which would otherwise have been unaffordable.

The economic downturn has also had an impact on how people view affordable housing schemes, with one in six (15%) of first time buyers saying they would not have considered the schemes previously, but have changed their mind due to the economic conditions.

Eight in ten (81%) first-time buyers claim to have a basic or good understanding of shared ownership schemes, although this is less for shared equity schemes (64%). 

Property_LadderBrad Bamfield CEO of Joint Equity said: “Over the past few years the shared home ownership concept has become more established and understood. However most people have only heard of the Government and Housing Association schemes and developers own schemes or Help to Buy for new houses.

“Government schemes still have a stigma attached and the social engineering aspects that Housing Associations apply put off many people. Of course developers only use shared home ownership to shift the rump of developments they cannot sell in any other way and buyers know that and of course are not impressed.”

What many people don’t know is that there is an alternative privately financed shared home ownership option which delivers quality homes to want-to-be homeowners – with no social agenda.”

Over the last 7 years Joint Equity has become a life style option for our Owner Partners which provides many advantages over other home ownership options. 

Find out more here www.jointequity.co.uk 

Sources: Lloyds TSB read research here