Rics: 351% decline in affordability

Research from the Royal Institution of Chartered Surveyors (Rics) has found affordability for first-time buyers has fallen by 351 per cent over the last decade.

At present a first-time buyer couple, both on lower quartile earnings - totalling £26,595 after taxes – would have to save 104 per cent of their salary in order to secure a property.

Including a deposit, fees and stamp duty the couple would have to pay £27,729 for an average property – making it virtually unobtainable for many.

This is a dramatic increase since the most affordable point, in 1996, when a similar couple would have to commit just 23 per cent of their salary.

"At the start of 2008, first-time buyers are finding it even harder to get a foothold on the housing ladder and the signs are that conditions are unlikely to get better in the short term," said Rics senior economist David Stubbs.

"Mortgage lenders are demanding ever higher deposits as the credit crunch continues to take effect."

The key drivers of the worsening accessibility picture are the slight reductions in loan-to-value ratios that lenders were offering first-time buyers, as well as the continued burden of stamp duty and the costs of buying a home.

Mortgage costs are also a continuing burden.

The same lower-quartile couple would have to commit 40.6 per cent of their earnings to mortgage repayments on the average property.

However, this is slightly below the record of 47.8 per cent, set in the first quarter of 1991.

Yet Rics still predicts some 128 houses will be repossessed each day during 2008.

"Those who are struggling with mortgage repayments are still faced with paying a large percentage of take home pay but there may be some release of pressure as earnings continue to rise," concluded Mr Stubbs.

"If the Bank of England cuts interest rates next week, many will breathe a sigh of relief."