One in four young workers can’t afford to buy a property because of expensive mortgages and house prices which remain unaffordable, according to research by the University of York.
Unsurprisingly, the worst areas are London and the south east where more than 40 per cent of households between the ages of 21 and 40 cannot get onto the property ladder. Across the UK, more than 28 per cent of young working households are unable to purchase even the cheapest properties in their area, despite falling house prices.
The research, undertaken by Professor Steve Wilcox, using data from Hometrack, defined young working households as those on incomes which are too high to claim housing benefit, but too low to acccess the bottom rung of the housing ladder.
Even in the most affordable area, the north east, 17 per cent of young working households remain priced out of the market.
Although the study took place in 2007, its authors say the market has not changed significantly since the start of 2008, based on the requirement for most young households to take out an 82 per cent loan-to-value mortgage at 5.7 per cent.
In 2007, average mortgage costs for a first time buyer jumped 12 per cent, with the mortgage cost-to-income ratio exceeding the previous house price spike in 1990.
Across the UK, there are 42 areas where households need six times earnings to buy a property, which is far more than most banks are willing to lend on today. By contrast, renting now costs around 68 per cent of the cost of buying a home.
The research concludes that even though house prices are now falling, the higher cost of mortgages, the requirement for larger deposits and tightened loan-to-value criteria will continue to restrict young workers’ access to property purchase and further damage the housing market.
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