Demand for rented homes looks set to increase in the coming years as new data suggests that many people who do not yet own property will not do so for quite some time.
The gap between income and house prices has sky-rocketed in recent years with various reports suggesting that a growing number of younger people are giving up the idea of ever owning their own home.
According to the latest Zoopla UK Cities House Price Index released today, the average income required for a first-time buyer to purchase a home has grown 9% since 2016 and stands at an average of £54,400.
Based on the data supplied by Zoopla, this is over £4,500 more than the amount needed three years ago.
The average deposit required for first-time buyers to purchase in a major UK city is currently £38,418.
The findings show that the range in incomes for first-time buyers to purchase property across the country is £26,000 to £84,000.
Weak price growth means affordability has improved in the three most expensive cities in the UK, which are Oxford, Cambridge and London.
The average income to buy a property in a UK city is up 9% since 2016, and yet this has dropped 4% in London over the same period.
However, the first-time buyers in London now need an average household income of £84,000 to purchase a home, which is unaffordable for most would-be purchasers, although it is worth pointing out that this is the lowest figure recorded since 2015.
Liverpool has the lowest income required for first-time buyers to buy at £26,000 and leads on property price growth which is 5% year-on-year.
Overall, residential property prices in UK Cities increased by 1.8% over the 12 months to May 2019.
Richard Donnell, research and insight director at Zoopla, commented: “Weakening city house price growth is a result of market fundamentals. Specifically, changing affordability dynamics for home buyers and the impact of successive tax changes since 2015. Together, these have impacted household buying power, and demand for housing, hitting high priced cities more than others.
“First-time buyers are an important group accounting for more than one in three sales. While the average household income to buy a typical home across UK cities has grown 9% since 2016, weaker price growth and recent price falls have led to a 5% reduction in the income to buy across the most expensive cities. It will come as a modest relief for would-be buyers although the income to purchase still remains relatively high. While it is a factor behind weaker house price growth it supports underlying demand for rental homes.
“Affordability remains attractive in many regional cities where house prices have not registered the gains seen in south eastern England. Liverpool has the lowest income required to buy and has the highest rate of price growth at 5%. We expect prices to continue to increase in cities where housing is in reach of those on average incomes.”