We all know how difficult it can be to get on the property ladder, but new figures have brought that into sharp focus, with the Office for National Statistics (ONS) revealing the salary and savings necessary to afford even an entry level property – with many neighbourhoods across the country off-limits to first-time buyers.
The figures show that a typical household in England and Wales needs an annual household income of £26,444 in order to borrow enough for an entry-level property. However, given that this costs an average of £140,000, prospective buyers will also need savings of £23,300 in order to cover the cost of stamp duty (£300), legal and moving costs (an estimated £2,000) and, ideally, a 15% deposit (£21,000), so even those who have the salary may find it difficult to stump up the cash.
According to ONS data, this means that a quarter of neighbourhoods in England and Wales are completely off-limits to prospective homeowners, because average incomes in these areas are well below the level needed, and that's before we even get to the struggles of saving for a deposit.
Some regions have it even tougher, with would-be homeowners in London facing a particularly uphill climb: the average price paid by Londoners for a first home last year stood at £423,000, which means they'd need an income of nearly £60,000 and savings of £55,000. This lack of affordability persists despite the fact that Londoners typically have higher salaries: a neighbourhood in Wandsworth, for example, had an estimated average annual household income of £89,223, but the income required for a property was £127,689.
The most affordable neighbourhoods were generally in the north of England and parts of Wales, with these areas having relatively low average incomes but also more affordable housing. However, this still doesn't mean it's easy to take that first step, with those lower incomes meaning it's harder to save for a deposit and associated moving costs. This all means it's vital to be prepared, and to start building your reserves as soon and as much as possible.
The key to taking that first step is making sure you've got a suitable deposit, together with an extra contingency fund for all those extra costs. This in itself may seem like a challenge, but it can be possible – start by taking a close look at your outgoings and making cutbacks wherever you can, and put those extra pounds here and there in a dedicated savings account.
You may want to take advantage of the various Government schemes aimed at helping first-time buyers, such as the Help to Buy ISA, which allows you to save up to £200 per month (after an initial investment of up to £1,200) and will give you a 25% top-up when you're ready to buy your first home. The maximum bonus that can be achieved is £3,000, so it could go a long way towards boosting your pot.
You may want to start researching your mortgage options, too. It's worth pointing out that, although the ONS based their figures on deposits of 15%, it's actually possible to secure a mortgage with a deposit of just 5%, which could make your savings total seem far more achievable. Check out the top mortgages for first-time buyers to see the kind of options available, and that way you can start planning your budget for the future, as well as for the short-term.
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.