The ability of first-time buyers to get a foot on the property ladder improved slightly last year, but many are still being held back by the rising cost of living.
Research by RBS, outlined in its Ability to Buy Index, found that first-time buyers’ ability to purchase a property increased by just 1% in 2011.
This is despite falling house prices and the stamp duty concession, which gives first time buyers a break from paying the 1% tax if they are purchasing a property worth up to £250,000.
The small in increase in the ability to buy has been largely attributed to the rising cost of living in the past year. First-time buyers’ earnings were found to have increased last year, but high inflation meant that many struggled to come up with the money required to purchase a mortgage.
“The RBS Ability to Buy Index improved by 1% in 2011 to its best level since 2009. But the size of improvement was hindered by higher living costs,” said Fionnuala Earley, UK Consumer Economist at RBS Group.
“More simplistic measures of affordability suggest a much bigger improvement than this. But by including living costs we get a much more accurate picture of the real ability to buy. Without the surge in prices of essentials, particularly transport, first-time buyers’ ability to buy would have improved to 2003 levels in 2011.”
High inflation last year meant that the amount of first-time buyers’ incomes which could be used to save for a deposit or make mortgage payments was lower than in 2010.
“A typical UK FTB will still have to save for almost three years to raise a 10% deposit, even after taking into account further modest falls in prices,” added Ms Earley.
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