Housing prices for first-time buyers reach nine-year high

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2016 was an incredibly historic year, bringing about change in every corner of the globe. Yet one thing that didn’t change was the rising price that first-time house-buyers have to pay to get on to the UK property ladder. With the average price paid by first-time buyers reaching a staggering £205,170 in 2016, why is it becoming increasingly difficult to purchase a first home?

Last year 60% of all first-time buyers in the UK took out a mortgage of 25 years or longer, and a further quarter took out a 30-35 year mortgage. Hundreds of thousands of new homeowners now face the daunting challenge of paying off an incredibly large mortgage for a substantial proportion of their lives. In London, the figures are even more bewildering, with the average deposit tipping over the £100,000 mark and the average first-time home costing £402,692.

These figures explain the increasing number of young people who struggle to move out of their parents’ houses and get on to the first rung of the property ladder. For an increasingly productive population, individuals need a place to live and be independent, but thousands of young people simply can’t afford the transition.

With the housing crisis in full swing and the UK building only around 130,000 of the 240,000 homes required to house our ever-growing population demand has been outrunning supply for years. House prices have increased accordingly.

However, what hits first-time buyers hardest has been disproportionate wage increases compared to the ever-increasing real cost of houses. Whilst real houses’ prices have risen by 151% since 1996, real earnings have risen by only a quarter. It’s hard enough for new graduates and undergraduates to find work with a reasonable wage, but when house prices are out of most people’s reach, it’s simply impossible for most first-time buyers to make their first investment.

Although the government wants to build more homes, getting anywhere near the required 200,000 mark is a long way off. Land needs to be freed up to build houses, and people need confidence that interest rates will remain low.

While it may be a pessimistic outlook, realistic projections for the future do not suggest any falls to come. However, there has been at least some recognition of this problem from the government and £3 billion has been set aside for the Housing and Communities Agency (HCA) to look into building homes in more efficient and modern ways and to work with local housing associations and councils to boost the amount of homes built each year.

With mass immigration, a severe lack of land, and a population living longer than ever before, what 2017 holds in store is uncertain. With the UK leaving the EU, economists are struggling to predict what’s around the corner for our increasingly delicate economy and this will not make it any easier for first-time buyers to enter the property market.