Unaffordability reaches new heights

According to recent statistics, the majority of under 30s cannot afford the minimum share of a studio of single bedroom shared ownership property within 20 miles of London.

Focusing on 525 shared ownership properties within a 20-mile radius of London, the Which? data looked at the cost of a minimum share in a studio or one-bedroom home. Compiled in November, the research found that on average, this would be £145,146, with the total average price of the property being £368,953.

For one of these properties, the minimum share would cost £7,258 with a 5% deposit on a 95% loan-to-value mortgage. The shared ownership organisation for London, First Steps, estimates a £1,189 total on rent, mortgage repayments and service charge each month.

Which? predicts that at least £37,300 would need to be earned by first-time buyers in order for affordability checks to be passed. This exceeds the £27,900 average earned by Londoners under 30.

This gap in affordability means that most under 30s are unable to afford 76% of studio and one-bedroom shared ownership properties both in and around London.

Londoners between the ages of 30 and 39 are more likely to be able to pay for these properties, with average earning of £43,039. The average individual within this age group would have the means to afford the minimum share of 71% of studio and one-bedroom properties, and 55% of all shared ownership properties.

Where the differing transport zones were concerned, none of the 28 studio and one-bedroom shared ownership properties in Zone 1 were within the means of the average under 30-year-old. Over two thirds were unaffordable for buyers between the ages of 30 and 39. Almost 90% of properties in Zone 2 and 3 were unaffordable for the under 30s and over 50% in Zone 4 were also too expensive. These figures indicate that there may be difficulties for under 30s to get onto the property ladder at all, especially in London.

Commenting on the research was David Blake from Which? Mortgage Advisers.

“This research demonstrates the impact of rising house and rental costs in the capital. Buyers need to be realistic about what they can borrow, and I would suggest that they look at numerous properties as rents can vary considerably. That said, it’s not all doom and gloom. The mortgage market is very buoyant right now and lenders certainly have an appetite to lend to first-time buyers.”

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