Many prospective homeowners in the UK have struggled to purchase entry-level property in 2016, a report published by the Office for National Statistics (ONS) on Friday (23 February) reveals.
The report showed that one in four properties in England and Wales was off-limits to these buyers, because their average income was less than what was needed to secure a mortgage in that area.
ONS data showed that the average cost of an entry-level property across England and Wales had increased by about 20% in the last decade to £140,000 ($175,591). Meanwhile, the average cost for new properties was higher at £180,000.
Amid these prices, the report said that a typical household in England and Wales could require an annual household income of £26,444 in order to secure a mortgage. This requirement was found to be much higher in London. Assuming a 15% deposit, the report said, new home buyers in the UK capital could require household income of about £60,000 and savings of £55,000, which was challenging for many.
Region-wise, some of the least affordable homes were found in London while the most affordable ones were found predominantly in the north of England and parts of Wales. With regards to the capital, the report said, it had some of the most extreme gaps between average income and the income required to buy an entry-level property.
For instance, in Wandsworth, a district of southwest London, while average annual household income of people stood at £89,223, the required amount to buy a basic home was estimated at £127,689. ONS added that this gap was not limited to the city. Citing another example it said, while average household income of people at Foxholes neighbourhood in Poole was just under £35,000, the income required was just under £40,000.
The report said costs such as a 15% deposit, stamp duty, legal fees and other associated costs had to be borne while buying a home.
For an average entry-level home in England and Wales costing £140,000, prospective buyers would require £300 in stamp duty, £2,000 in legal and moving costs and £21,000 for a 15% deposit, taking the total to £23,300.
Amid these costs, ONS said first-time buyers were required to have substantial savings or other sources of funding such as from parents.