Wages need to double to keep pace with house prices

 

Personal Finance Editor

If salaries had kept pace with house price inflation in the last 15 years, you would be paid more than twice as much now.

That would mean the average wage would be more than £55,000, according to housing charity Shelter, rather than the official £25,932.

The gap between wages and property prices is widening as salaries remain static and home values soar leaving average earners needing a £29,000 pay increase to be as well off in relation to property prices as they were in 1997.

Worst hit are those in the London borough of Hackney where pay would need to be four times higher than the current average to have kept pace with property.

Average earners take home £31,304 in Hackney, but if wages had matched property inflation, the salary would stand at £131,924.

In Westminster the gap climbs to £105,375, but workers outside London have also been hit by the double-whammy of effective pay freezes and soaring home prices.

People on average wages in Watford and Brighton & Hove would need an extra £47,000 each year to keep up with local house price inflation, while those in Manchester would need to earn £34,000 more.

Shelter’s research suggests that there is not a single area in the country where wage and house price inflation have remained aligned.

Burnley has the smallest gap, but £10,000 would still need to be added onto the average salary to put it in line with the rise in house prices.

Campbell Robb, Shelter’s chief, said:  “When you’d need to more than double your salary just to keep up with rising house prices, it is no surprise that the dream of a home of their own is slipping further out of reach for a generation.”

Soaring house prices have left people being forced to take out larger mortgages with the average first-time buyer loan climbing 11.4 per cent in 2013 to reach £122,040.

Meanwhile official figures have revealed that more than 3.3 million 20-to-34-year-olds were living with their parents last year in the UK.

“Politicians need to start meeting people halfway by committing to bold solutions that will get more affordable homes built,” said Mr Robb. “Otherwise future generations will find themselves priced out of a stable home, however hard they work or save.”

Case Study

Andy, 28, and his wife Rachel live at his parent’s house in Enfield because there is no way they can afford to rent and save up for a deposit at the same time.

“We have thought about moving out for a long time and always said that when we get married we’ll definitely do it. We really want our own space but are finding it very hard,” he says.

The couple have looked into renting but the cost is prohibitive and means they’d struggle each month.

“If we moved out into a flat now, we wouldn’t even break even, let alone be able to save money for a deposit. We’d be spending more than we earn and would have to eat into the money we’re trying to save for a deposit which is the last thing we want to do.”

Andy’s brother and his partner are also living in the house because they are in the same situation.

Latest stories from i100
Have you tried new the Independent Digital Edition apps?

Day In a Page

Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate