The earnings a first time buyers need to to get on the property ladder in a UK city has increased by £8,000 over the last three years.
Data from the Hometrack UK Cities House Price Index shows earnings for first time buyers need to earn on average £52,994 to buy a property outright in one of the top 20 UK cities.
The increase in household income is 18% or £8,020 rising from £44,974 in 2015 compared to the average current property value of £254,400.
House price growth in cities averaged 3.9% year-on-year to August 2018 where prices continue to rise faster than earnings in 16 out of 20 cities backed by low mortgage rates and high employment.
London is the most expensive city with income of £84,250 up 1% in three years with falls for Cambridge lower by -3% to £74,000, Oxford down -1% to £69,750 and Aberdeen down -14% to £34,262.
Price growth in affordable cities
The analysis of incomes which range from £25,000 to £82,000 indicates there is further scope for house price growth in the most affordable cities where prices are rising the fastest.
Greater competition from buy-to-let investors over time has increased the purchase price and reduced the supply of suitable properties for first time buyers or home movers.
The following table from Hometrack shows first time buyer income to get on the property ladder and how this has change from 2015 to 2018.
| City | Income 2018 | 3 year change |
|---|---|---|
| London | £84,250 | 1% |
| Cambridge | £74,000 | -3% |
| Oxford | £69,750 | -1% |
| Bournemouth | £61,311 | 21% |
| Bristol | £58,826 | 24% |
| Portsmouth | £50,202 | 21% |
| Edinburgh | £48,277 | 18% |
| Southampton | £47,871 | 1% |
| Cardiff | £43,043 | 18% |
| Leicester | £36,317 | 23% |
| Manchester | £34,770 | 24% |
| Leeds | £34,583 | 19% |
| Aberdeen | £34,262 | -14% |
| Birmingham | £33,619 | 23% |
| Nottingham | £31,904 | 23% |
| Sheffield | £28,530 | 15% |
| Belfast | £27,222 | 13% |
| Newcastle | £27,015 | 10% |
| Glasgow | £25,607 | 14% |
| Liverpool | £24,731 | 14% |
The largest rise in income since 2015 required to buy a city property outright is Bristol and Manchester up about 24%, followed by Leicester, Birmingham and Nottingham higher by about 23%.
Mortgage regulations limit the amount homeowners can borrow to boost their buying power and is one of the reasons house price growth has stalled in London.
Affordability can make it difficult for home movers to trade up to a larger more expensive property in the same area which means they need a larger deposit or mortgage.
The highest property values is London averaging £485,300 and for older homeowners this allows the equity release mortgage buyer to access wealth to help maintain their standard of living or for home and garden improvements.
House price slowing along south coast
Outside of London where income levels for first time buyers is high it is clear house price growth is slowing such as cities along the south coast of England.
In Bournemouth and Bristol incomes required are £58,000 or more with house prices over £282,000, Portsmouth and Southampton incomes need to be £48,000 or more and average prices are over £228,000.
The more affordable city is Liverpool and growing the fastest with house prices up 7.5% year-on-year with average values of £120,100 and income to buy of only £24,731.
Nottingham, Manchester, Leicester and Birmingham have seen property values rise over 6.6% over the year requiring earnings from £31,904 to £36,317.
For existing homeowners one advantage of rising house prices is the remortgage buyers can now release capital for home improvements.
According to Hometrack, the primary drivers of weaker growth in UK house prices were stretched affordability, lending affordability regulations and housing related tax changes such as stamp duty.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or a buy-to-let investor.
Learn more by using the property value tracker chart, mortgage costs calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to consolidate debt, holidays of a lifetime or pay for care at home.
