Young buyers with deposits still can’t buy homes

Soaring house prices over the last 20 years mean young people with a deposit, desperate to buy their first home, can’t afford to buy even the cheapest homes in their area.

A report by the Institute for Fiscal Studies (IFS) has found that house prices have risen by an average of 173% in the last two decades. Around 40% of first-time buyers looking to bet their first foot on the housing ladder can’t afford the asking price because the average pay for 25 to 34-year-olds has risen by just 19% over the same period.

Deposit

Back in 1996, 93% of those with a deposit could borrow four and a half times their salary and buy their first home.

But 20 years later the figure has dropped to 61%. The IFS added that the increased cost of renting – up from an average of £140 a week to £200 – has ‘reduced the purchasing power of young adults’ and made it harder to save for a deposit.

Try to save

Bradley Tucker – a 27-year-old recruitment worker – and his partner have moved out of their flat and into a shared home so they can try to save their deposit. When Bradley’s dad started saving for his deposit 20 years ago he managed it within one year. Bradley reckons it’s going to cost him a decade.

He said: “For young people it seems an almost impossible challenge. It’s a depressing outlook.”

Big increases

Polly Simpson of IFS said: “Big increases in house prices compared to incomes over the last two decades mean that it is increasingly difficult for young adults to get on the housing ladder, even if they do manage to save a 10 per cent deposit.

“Many young adults cannot borrow enough to buy a cheap home in their area, let alone an average-priced one. These trends have increased inequality between older and younger generations, and within the younger generation too.”

Think tank

Onward, an influential Westminster think tank, has come up with a proposal for the government to give buy-to-let landlords capital gains tax relief if they sell houses to people who have been sitting tenants for three years or more, with the money being split between landlord and tenant.

The hope is that it will encourage landlords to offer longer lets and then offer the house for sale to their tenants who are struggling to get on the property ladder.

Onward director, Will Tanner, said: “It is time for ministers to give private renters the chance to make their house a home, just as a Conservative government gave a previous generation of council tenants the Right to Buy their home years ago.”

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Highest number

A spokesman for the Ministry of Housing, Communities and Local Government, said: “Last year saw the highest number of first-time buyers for over a decade.
“Through our Help to Buy scheme and the cut in stamp duty for first-time buyers we are helping restore the dream of home ownership for a new generation.”