First time buyers will need £64,000 salary to afford an average home by 2020, warns Shelter

Posted 14 Apr 2016

Typical first time buyers will need to earn £64k a year by 2020, new research by
housing and homelessness charity Shelter shows. This is an increase of nearly a fifth on the £52k needed for a typical first time buyer's mortgage today.

On top of this they would need a deposit of £46,000 to keep up with rocketing house prices, which are projected to rise to £270,000 over the next four years.

The research looked at the salary and deposit needed for the average first time buyer today, and calculated what they would be in 2020 if they grew in line with projected increases in house prices. 

These figures come as no surprise given that, over the last five years, the country's severe housing shortage has seen house prices rise six times faster than wages.

Campbell Robb, Shelter's Chief Executive, said: "When house prices are increasing six times faster than the average wage, it's no wonder people on ordinary incomes are being locked out of a home of their own.  

As the Government's Housing Bill passes through the House of Lords, Shelter is warning that, unless the government commits to building homes that people on ordinary incomes can actually afford, the situation is only likely to get worse.

"With the situation only set to get worse, Generation Rent will be forced to resign themselves to a life in expensive, unstable private renting, and wave goodbye to their dreams of a home to put down roots in. 

"It doesn't have to be like this. The Government has the power to turn our housing crisis around, but only if they stop with schemes like Starter Homes which only help higher earners, and start investing in homes that people on ordinary incomes can actually afford to live in."

Case Study: Mike, a nurse, is currently renting and has had to move because of high housing costs.

"On a nurse's salary and with house prices so high, I can't see how I'll ever own my own home. At the moment, it feels like nothing more than a pipe dream.

"I'm stuck renting and looking at moving away from where I currently live because rents have gone up so much as well. It just seems so unfair – if you work hard, you should be able to afford a place to call home."

Notes to editors:

Shelter has been helping people fight bad housing and
homelessness for 50 years. For free and independent advice from Shelter visit shelter.org.uk/advice or call the
helpline on 0808 800 4444.

  • Projections that the salary needed to afford an
    average home by 2020 will be £64,000, with a £46,000 deposit, and the average
    UK house price reaching £270,000, are based on Prof Paul Chesire's
    recent projection
    that UK house
    prices are expected to increase by 23% by 2020. This analysis assumes that:

An average mortgage is taken out for an average first
time buyer property

Average mortgage advances and loan to income ratios
remain the same in 2020 as they were in 2015 

  • Two data sets were used to calculate and compare the
    growth in house prices and wages between 2010 and 2015 by region, which you can
    find in the table below. 

  • The typical salary
    is the median salary for full-time workers, as reported in the Annual Survey of
    Hours and Earnings (ASHE) which you can find here

  • The average house price is the mix-adjusted first-time
    buyer average from the latest ONS House Price
    Index tables

  • This ties in with the latest forecast from the Office
    for Budget Responsibility (OBR) projecting a 26.4% rise in house prices by 2021.

  • The latest projections
    from the Town and Country Planning Association revealed
    that we need to
    build 312,000 homes per year in England. This is 2.7 times the 114,236 built on
    average over the last five years, according to DCLG statistics.

Regional breakdown of house prices versus salaries in
order of expense

RegionHouse price:wage growth 2010-2015Current average FtB priceCurrent median full-time salaryEstimated FtB price in 2020Income needed by 2020Deposit needed in 2020
UK6£220,000£27,600£270,000£64,000£46,000
London15£419,000£33,200£558,000£106,000£138,000
South East8£257,000£30,100£316,000£66,000£61,000
East5£227,000£29,300£279,000£63,000£51,000
South West3£193,000£26,500£236,000£51,000£47,000
West Midlands3£155,000£25,700£183,000£46,000£28,000
East Midlands5£147,000£25,600£175,000£44,000£27,000
Yorks & Humber4£139,000£25,100£164,000£44,000£25,000
North West3£141,000£25,700£165,000£44,000£25,000
North East2£122,000£25,200£142,000£40,000£21,000