A new survey by homelessness charity Shelter has revealed that first-time buyers trying to get on the property ladder will need to earn £64,000 by 2020.
According to the research, this is an increase of nearly a fifth on the £52,000 currently needed for a typical first time-buyer’s mortgage.
In addition, they would need a deposit of £46,000 to keep up with house prices, which have been projected to rise to £270,000 over the next four years.
There are fears that first-time buyers are being squeezed out of the market due to the dwindling supply of suitable homes and ballooning property prices.
Tougher affordability checks from lenders and rising house prices have made it increasingly difficult for first-time buyers with smaller deposits to get on the property ladder.
Low interest rates combined with the economic recovery have done little to reduce the need for rented housing, while house price inflation ahead of wage growth has pushed property prices out of reach for many.
Shelter warned that unless the government builds homes that people on ordinary incomes can actually afford, the situation was likely to get worse.
Campbell Robb, Shelter’s chief executive, said: “When house prices are increasing six times faster than the average wage, it’s no wonder people on ordinary incomes are being locked out of a home of their own.
“With the situation only set to get worse, Generation Rent will be forced to resign themselves to a life in expensive, unstable private renting, and wave goodbye to their dreams of a home to put down roots in.
“It doesn’t have to be like this. The government has the power to turn our housing crisis around, but only if they stop with schemes like starter homes which only help higher earners and start investing in homes that people on ordinary incomes can actually afford to live in.”
Stephen Smith, director of Legal & General Housing Partnerships, said: “It is important that Shelter has shown these issues so starkly, laying bare the extent of the housing crisis in this country, exposing the gulf between supply and demand. As wage inflation continually fails to keep up with rising house prices more and more consumers are priced out of the market. If this is left to continue, Generation Rent will become the norm and owning a property will become an unaffordable dream for many.
“A housebuilding revolution is what this country is crying out for – and a joined up approach between the government and the industry is needed to solve this issue. All options should be explored to help solve this problem.”
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