The ability to buy a home has improved for the third quarter in a row and is now the best it has been for 13 years. Families working full-time with children have seen the greatest improvement in their ability to buy a home over the last year. This group has the most disposable income left after paying household essentials and making mortgage payments, while first-time buyers in London are among the worst off.
Ability to Buy, published today by leading residential estate agents Hamptons International, is the only affordability index available which measures the pressures buyers face from changes in the cost of living as well as changes in interest payments and house prices. It is the most accurate gauge of affordability for different households across the country.
The findings for Q2 2015 show:
Ability to buy in England and Wales has improved for the third consecutive quarter and in Q2 2015 is the best it has been for 13 years. The index increased by 2% over the last year to bring it to its highest level since Q1 2002.
Ability to buy is 40% up on 2007 when it was at its worst, and is just 4% below the best ever recording since the index began in 1997. In the North East and Wales, ability to buy is the best it has been since our records began.
After paying for essentials and mortgage payments, families working full-time with children – in almost every region – saw the biggest improvement in cash terms with an average of an extra £95 per month left over. But first-time buyers in London were £6 worse off per month than this time last year.
The improvement is due to a fall in the overall spending on essentials such as food, transport and utility bills. This coupled with a rise in average UK incomes of 3% in Q2 2015 compared with a year earlier. Mortgage payments have also fallen in Q2, despite the rise in average house prices.
Ability to buy improved in all parts of England and Wales except London in the year to Q2 2015. It improved or remained the same everywhere except the North West, London and the South West between Q1 and Q2 2015.
The North South divide in ability to buy is still very much a reality. Ability to buy in the North and Midlands is continuing to improve while conditions are much more difficult in the South.
As economic conditions get better, wages grow and interest rate rises remain far off, the cost of servicing a mortgage will become more affordable. The biggest hurdle is saving the necessary deposit. Higher wages will help savings, but while house prices increase it will become more difficult to reach the required sum.
Fionnuala Earley, Director of Residential Research at Hamptons International said:
“Average ability to buy in England and Wales improved for the third consecutive quarter and in Q2 2015 is the best it has been for 13 years. Compared with last year ability to buy is better everywhere in the country apart from London, where rising prices have outweighed the benefit of lower food, transport and utility bills and lower mortgage rates.
“Ability to buy worsened in the last quarter in London and the South West compared with Q1 2015, keeping the North South divide in affordability wide open. However, higher house price growth and low earnings growth in the North West contributed to the deterioration in the ability to buy in this region too. In the North East and Wales ability to buy is the best it has ever been since the index began in 1997.
“Lower spending on essentials due to falling inflation means that a typical first-time buyer would have £42 more left at the end of the month to save for a home compared with Q2 2014. But the real barrier for first-time buyers is saving for a deposit.”
Hamptons International is soon to release a sister index, Time to Save, which looks at the time needed to save for a deposit.
For further information on Hamptons International please contact:
Press Office Hamptons International
T: 0776 967 7825
T: 07760 163 120
About Hamptons International
Hamptons International is a leading residential estate agent and property services organisation, operating in London and the South of the UK. With more than 140 years of experience in the property market and a commitment to industry innovation and exceptional levels of customer service, Hamptons International today offers a wealth of award-winning services including UK and international Sales, Lettings, Property Management, Corporate Services, Residential Development, Development Land, Valuation and Property Finance.
With headquarters in London’s West End, Hamptons International has an international network of more than 87 offices and is a subsidiary of Countrywide, the UK’s largest estate agency and property services group.