Latest research has found that deposits for houses have increased tenfold in the last 20 years compared to household incomes which have only doubled.
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First time buyers still face a tough time getting a foot on the property ladder as the rising cost of properties means a rise in deposits – without no significant increase in salaries.
The research completed by First Direct found that since 1990, the average housing deposit has risen from around £6,793 to an average of £65,924 in 2011. The combination of rising property prices as well as a reduction in the amount that banks are willing to lend, has forced buyers to contribute a larger amount to their deposit. An average household income has risen by only 2.5 times in the same period that house prices have risen by almost tenfold (approximately 9.7 times).
House prices have also risen fourfold, leaving many first time buyers struggling to get onto the property ladder.
Research shows that 2010 was the most difficult year to buy a house in the last 20 years, as the average house price was 6.3 times the average household income. In addition to that, the average deposit was running at 1.7 times the average income.
Affordability has become a significant problem for potential homeowners as they struggle to save towards a deposit.
Bruno Genovese, from First Direct said that the average deposit needed for a property had actually risen more than twice as fast as house prices and almost four times as fast as income. “This is why we are seeing first time buyers getting older, with more and more people struggling to get on the property ladder” he said. “In this climate, it really is important that people save as much as they can to raise the money for a deposit”.
In the last recession (2008-2009) the average household income dropped by £1,688. While house prices dropped by £10,148 the average deposit rose by over £10,000 in one year alone.
Since 2007, the average housing deposit has risen by £22,451, adding more to the misery of first time buyers, as this has further reduced the possibility of buying a home earlier on in life. The average age for a first time buyer is now 37 (compared to 27 in the early 1990s).