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Cost of becoming a homeowner worst for over two decades

The cost of becoming a home purchaser and the ongoing cost of owning a home is almost the worst for over two decades and will get worse, says the Royal Institute of Chartered Surveyors.

It also predicts that house prices will rise by 10% in the next two years.

An accessibility index developed by RICS reveals that over the past 10 years, the rise in house prices has been so pronounced that accessibility is almost 300% worse than in 1996 and currently as low as the weak levels experienced in 1980.

A first-time buyer couple will now have to save up to the equivalent of 74% of joint take home pay, to build up the 29,200 needed for up front buying costs on a typical home, deposit and Stamp Duty.

This equates to a substantial rise from the low point of 25.2% required in 1996.

Affordability is at the worst levels since 1992 with home owners struggling to service mortgages.

A two-person household on average incomes would have to spend 22% of their take home pay to service their mortgage, a significant increase from the low point of 14.1% in 1996.

Both these factors have pushed first-time buyers against a property brick wall.

House prices are expected to cool in 2007 as further interest rates rises take effect with average house prices rising by only 3%, but given the current upward momentum in the housing market, RICS expects the year will end with average house prices 7% above its level at the end of 2005.

David Stubbs, economist at RICS, says: Unless house building levels improve, and levels keep pace with population growth and rising income and wealth, people will continue to find it difficult to access the housing market.

If the housing market is to become more accessible, lenders must continue to offer generous funding levels, and the government should, out of necessity, promote a significant increase in the housing stock.

The government must act to create more social housing and tackle the problem of nimbyism in the countryside by building affordable housing for key local workers.

The financial pressures of up front buying costs and rising energy prices will continue to create a have and have not property society.


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