Home nation with lowest house prices
We look at the UK's four nations and ask which offer the best prospects for beleaguered first-time buyers.
Image: Dominic Lipinski - PA Wire
First-time buyers in the UK are finding it tougher to get on the ladder, despite lower prices in most areas. Their numbers in all four nations are down by between 20% and 40% since the credit crunch.
This is partly because those already owning property are not moving upwards due to job and money worries. It's also because potential buyers are worried about further job losses and the risk of prices plummeting after they buy.
Stricter lending criteria are also to blame. Apart from tougher controls on your income, lenders are demanding larger deposits if you want to buy a home.
The Council of Mortgage Lenders (CML) has looked at how affordable property is in Northern Ireland, Scotland and Wales, using salary multiples. In their case they use the ratio of average salaries to the average mortgage taken out.
However, the figures could mislead you. The CML compares salaries to the value of the mortgages taken out, rather than the house price. This means excluding the deposit from the overall price, which naturally makes the homes seem more affordable. Given that most buyers will use a deposit to get their home, the CML's way might make more sense, but only if you use it consistently.
Also, the CML calculates the average value of a mortgage in a different way to most, using median (the middle number) rather than mean (the average of all the figures).
Ordinarily, a typical salary multiple is 3 to 3.5. Anything less indicates that property prices are cheap. As well as looking at the CML's salary multiples, I've also indicated what I believe to be the ratio between salaries and house prices.
So let's have a closer look at these figures for each of the UK nations plus the average deposit first-time buyers need to put together and the average income.
If you're a first-time buyer, you'll need a 17% deposit to buy your first home in Northern Ireland. The average household income for first-time buyers is around £26,000. The CML says the average salary multiple is 3.34, but I estimate that first-time buyer house prices at the end of 2010 were actually around 4.5 times the average salary.
First-time buyers in Scotland need a hefty 23% deposit and the average household income for people getting onto the property ladder for the first time is between £28,000 and £29,000. The average first-time buyer needs a mortgage 2.89 times the size of their salary. However, as with Northern Ireland, looking at salaries to house prices, I estimate the real figure is actually nearer 4.5 times.
You'll need, on average, a 20% deposit to buy your first home in Wales and, as in Scotland, an average household income of between £28,000 and £29,000. The CML says that the salary multiple is 3.06, although again it's probably nearer 4.5 times when you look at actual house prices.
The CML has no specific data on the average first-time buyer deposit for a home in England, but it is clearly also far above previous levels. I estimate the average household income of first-time buyers to be around £40,000.
Looking at regional data from the Office for National Statistics, it seems likely that London is almost solely responsible for these inflated average earnings, with the next-highest region, the south east, having salaries much closer to Scotland and Wales than to the UK's capital. On average, London's eight million people earn far, far more than the rest of the country.
I have estimated the salary multiple for England using government statistics, and on that basis house prices were still more than five times salaries at the end of 2010. The small falls we have seen this year will have had little impact.
Age the same across the UK
There is no difference in the average age of first-time buyers in all the four nations - the typical person buying their first home will be aged 28 or 29 across the UK. However, if your parents don't help you, it could well be that you'll be past 35 before you make the jump onto that high bottom rung.
NOT THE cheapest UK nation for first-time buyers
DON'T BUY DON'T TRY ITS A RIPOFFF.
SUN SAND AND SEA FOR ME.
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