The “affordability ratio” between how much first-time buyers need to earn to afford a property in London and how much they actually earn has jumped by 235% in less than two decades, new figures show.
Although house prices in the capital are falling, the data from the Office for National Statistics (ONS) shows the extent of the worsening housing crisis facing Millennials.
So how much is needed to get on the property ladder?
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
The ONS compared the typical earnings of people aged between 22 and 29 and the average house price at the lower end of the market, says The Times.
The data revealed that the typical Londoner in that age range earns £25,780 and the average lowest quartile house price is £336,000 – 13 times higher.
In 1999, house prices in the capital were 3.9 times the average annual earnings. Even five years ago, the gap was 9.8 times salary, reports The Daily Telegraph.
“To have to spend 13 times your earnings simply to get on the first rung of the property ladder is borderline obscene,” said Ross Boyd of mortgage site Dashly.
“While average UK house price growth has been slowing for some time now, the sheer lack of supply means prices are being propped up and that’s contributing to the continued lack of affordability in certain areas of the country.”
Lawrence Bowles, an analyst at estate agent Savills, added: “Not only have house prices as a multiple of income risen exponentially, the median first-time buyer deposit - at close to £100,000 - is a huge barrier.”
Outside London, first-time buyers need to spend at least ten times their income in the southeast, east and southwest of England. In other areas of England, it is between five and eight times.
But as the Daily Mail points out, banks rarely lend more than five times a buyer’s salary.
As a result, younger generations are being forced to rent for longer or turn to the “Bank of Mum and Dad”, says the newspaper.
Create an account with the same email registered to your subscription to unlock access.