The Coronavirus has brought about great change and uncertainty and the housing market is certainly not exempt from this change and uncertainty. With housing prices continuing to rise, houses become more and more unaffordable for young adults and young families but how unaffordable is it?
Despite the government cutting stamp duty allowing buyers to save potentially £15,000, houses are becoming more unaffordable. The Land Registry’s UK House Price Index says house prices have increased 2.5% since last year in August to reach a national average price of £239,196.
In Sutton, the average price of homes is now around £380,000. Assuming you buy a house at this average price with a fixed rate of 2% which remains the same for 25 years your monthly mortgage payments will be £1,611 and over the 25 years you will pay £483,279. To put that in perspective the average salary of 30 year olds who are the majority of first time buyers is £36,983 pre-tax, after income tax it is £28,790 or £2,399 a month.
An average first time buyer in the UK therefore is spending 67% of their salary on their mortgage and has £788 to spend every month including bills. The average cost of living in the UK is around £800 and it is higher in London. A first time buyer as you can see is not therefore able to provide for a good standard of living and own a house.
I know that’s a lot of numbers, but it is clear houses are unaffordable for first time buyers, it is very hard for young people to buy a house and also have a good standard of living not only in central London but also Sutton and other towns on the outer edge of London. However is their hope for buyers in the future? Due to the uncertainty around coronavirus and its great effect on our economy it is predicted that house prices will fall by 14% in 2021, so will young people start to be able to buy homes? What do you think feel free to write your thoughts in the comments.
