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London and southeast property market “distorting national average” (11 August 2014)

Date: 11/08/2014
Duncan Lewis, Legal News Solicitors, London and southeast property market “distorting national average”

A report by The Money Charity says that first-time buyers may have a long wait before they can buy their own home, with many young adults facing waits of up to 22 years before they can save enough for a deposit at current figures.

A separate report has found that house prices have risen by an average of 9.9% in the last year, mainly fuelled by escalating prices in the London property market. The average house price in England and Wales now stands at £270,636, according to LSL Property Services – however, if figures relating to the London and southeast property markets are removed from estimates, seven out of 11 regions in England and Wales have actually seen declining house prices over the last year.

Without the southeast’s and London’s escalating property prices, the average rise in house prices falls to 4.6%. This still leaves the average price of a property in England and Wales at a little under £185,000, however.

However, young house buyers are still facing long waits to buy their own home because of a lack of available affordable housing and escalating rental prices in the housing market, making it almost impossible to save enough capital for a deposit on a new home.

More generations of young adults face having to live with their parents or spending money on renting a home, rather than owning their own homes.

The Money Charity says that employees save on average just 4.9% of their salary, meaning that a worker earning an average salary of £23,412 would have to wait 22 years to save up for a deposit of £27,719 on a home, using estimates provided by the Council of Mortgage Lenders.

The government’s Help to Buy scheme allows first-time buyers to put down deposits of just 5% on new-build homes. However, London has seen some of the lowest take-ups in the scheme – possibly because of higher property prices in the capital.

Chief executive of The Money Charity, Michelle Highman, told the Daily Mail:

“Not only are most young, hardworking people struggling to save the large sums of money needed for a deposit, but new rules mean they will also face stricter checks before being granted a mortgage.

“However, the research clearly highlights the importance of planning ahead for major purchases like a home.”

Saving for a home is not necessarily a new phenomenon, as previous generations have also struggled to afford their first home. Under Margaret Thatcher’s Conservative government the Right to Buy scheme for council house tenants was launched, meaning many Britons became homeowners for the first time.

However, escalating interest rates and a property bubble which burst left some new homeowners in negative equity, with their homes worth less than the mortgages they had taken out to buy them with.

Some homeowners who bought their council homes under Right to Buy were also unable to pay large bills for maintenance on their homes, which previously would have been paid by the Local Authority.

The selling off of council homes since the Thatcher era has also left shortages in social housing stock, which are now beginning to bite as fewer people are able to afford to buy and the population of the UK continues to grow, with more families needing affordable homes.

The Bank of England governor Mark Carney has also been accused of giving “mixed messages” about when interest rates might rise – last week the Bank of England said that any increase in the base rate would have to be managed carefully because of ongoing high levels of household debt in the UK.

Duncan Lewis Housing Solicitors

Duncan Lewis housing solicitors can advise homeowners on housing matters such as debt management solutions and mortgage repossession – and Duncan Lewis also offer competitively priced conveyancing services to home buyers.

Duncan Lewis is also one of the UK’s leading providers of Legal Aid services and is able to advise social housing tenants and rental tenants in private sector housing on disrepair, Landlord & Tenant disputes, housing possession and unlawful eviction.

For expert legal advice on housing law, contact Duncan Lewis housing solicitors on 020 7923 4020.

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