Before we set our hearts on buying a home, let’s have a look at the cost of houses.
It comes as no surprise that London continues to be the most expensive place to buy a house with the average property costing £524,000 according to the Office for National Statistics*. In the North East house hunters could buy a property for an average of £158,000 which is the lowest price in England. Average house prices in London, the South East and the East all exceeded the UK average price of £284,000. Excluding London and the South East, the average UK house price was £216,000.
Shelter conducted research based on ONS figures at the end of 2015 which suggested a first-time buyer in London would need to pay an average of £419,000 for a home made up of a deposit of £104,000 and income of £80,000. By 2020 these figures are projected to rise to deposit of £138,000 and income of £106,000 for a property worth £558,000. Across the UK a first time buyer would need a deposit of £38,000 and an income of £52,000 to secure a property of £220,000.
Wages have increased much more slowly than house prices since 1969 according to research conducted by Shelter last year, making it extremely difficult for first time buyers to get on the property ladder. This includes military personnel for whom there may be fewer incentives than key workers due to the provision of service accommodation on bases.
It's very important to have a home for your family but your first question should be, 'do I need to own my house?' While owning a home might have looked like a great way of saving money in the past, that might not be true always and you could end up owing more than the house is worth.
If you do decide to buy one, the rise in price per year can be seen in the diagram below. However, house prices can fall as well and, as a general rule, where they rise most they could fall most as well. Usually, rural prices appear to fluctuate less. This chart shows where the prices change:
As your home is at risk if you fail to pay off your debts (including the mortgage), it is vital that you can afford the home you want. Ask yourself if it matters if your house prices go up or down - you need a roof over your head and that's why we're talking 'homes'. If you’re looking to buy a house, your cost of living, the interest rates, your other bills and payments and your overall living standards are important and knowing what they are will help you work out if your target hosue is affordable.
Over the next few blogs, we're going to look at affordability, types of mortgage and what this all means to people looking at the housing ladder for the first time.
*This data is from February 2016 released by the Office for National Statistics on 12 April.
The images are kindly reproduced from the excellent Land Registry Home Price Report Apr 16 - you can get a copy from House Price Index Report 2016