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Housing costs hit families

By Bridgid Nzekwu

Updated on 05 September 2007

A home fit for a footballer, wealthy Russian or mega-rich tycoon.

With price tags which run into millions of pounds, many houses in Chelsea are strictly for those at the top end of the housing market.

But it's not just lavish mansions that are out of reach for the ordinary buyer.

Figures from the Royal Institution of Chartered Surveyors reveal just how unaffordable it's becoming to get a foot even on the bottom rung of the property ladder.

Twenty percent of the housing market is made up of first time buyers and they face the most depressing situation since the 1990s. The RICS says monthly mortgage payments are eating up biggest chunk of disposable income for 17 years.

And it's now four and a half times more difficult to save a deposit for a home than it was a decade ago.

In 1996 a couple in the bottom quarter of earners would have had to save 21 per cent of their joint take home pay for a deposit to buy a home.

Now that same couple would have to save an astonishing 96 per cent of their joint take home pay. And in some parts of the country it's virtually impossible for many first time buyers.

In London that low-earning couple would need 112 per cent of their joint take home pay to get on the property ladder.

In the last 10 years house prices have grown three and a half times faster than average salaries. A three bedroom semi-detached house now costs just under 200 thousand pounds - that's almost six times the average salary.

According to the TUC, a key factor distorting the housing market for ordinary buyers is inflated boardroom pay and City bonuses which it blames for driving up property prices. Some estate agents agree.


Average salary: £19,375
Average house price: £69,657

Average salary: £22,105
Average house price: ££86,095<

Average salary: £25,906
Average house price: £161,742

Average salary: £28,889
Average house price: £199,770

Source: ONS and Halifax

Credit crunch

Add to that recent turmoil in the global credit markets, and many predict lenders will make it more difficult to borrow.

All these factors are worrying consumers. The Nationwide Building Society says all measures of confidence dropped in August - the first time that's happened since December 2006.

The government insists its plans for three million new homes by 2020 is the key to the housing crisis.

It's some comfort to buyers that house prices have started to slow down in recent months. But while demand outstrips supply, affordability will remain a huge problem.

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