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Owning a home has become more affordable, says NAO

Posted 20 January 2017 by Ben Salisbury

A new report from the National Audit Office says owning a home is now more affordable but getting on the housing ladder has become more difficult since 2008

Owning your own home has become much more affordable since 2007 but getting that first mortgage as a first-time buyer has become more difficult, according to a new report.

A new study by the National Audit Office (NAO) concludes that “the need for housing in England has grown faster than its supply and housebuilding needs to increase across the country.”

If you do manage to get a mortgage, it is much easier to manage financially than it used to be. The NAO found that the percentage of homeowners who spent more than 25% of their net income on housing dropped from 40% to 19% for people who have a mortgage.

By contrast, getting a mortgage has become significantly more difficult for first-time buyers and social housing rents have been rising faster than average earnings since 2001-2 making it hard to save for a deposit.

The report found that last year first-time buyers paid on average a deposit of 21%, up from 13% in 1990, though down from 28% in 2009 after the credit crunch the previous year. However, because house prices have continued to rise in most parts of the country since 2009, in actual cash terms first-time buyers still have to find a bigger deposit than in 2009.

The NAO said: “Although owner-occupation has become more affordable in recent years, it has also become harder for people to become home owners in the first place.”

In its overview of the housing market and government housing policy in England the NAO estimated that the government spent around £28bn in 2015-16 on housing, mainly on housing benefit where there were 4.1m claimants costing almost £21bn.

The government aims to increase the number of people who own their own home and to build one million new homes by 2020.

The NAO confirmed what most people already know, that the rate of housebuilding is not keeping up with this target, particularly in London.

However, the NAO said that to reach the target there needs to be 174,000 net additions each year, which is not only new build homes but also converted properties.

The NAO said projections point to at least 227,000 new households formed each year between 2011 and 2021 which is well above the annual average of 166,000 extra homes in England over the last 10 years, suggesting that even if the targets are met, the amount of new homes being built won’t be enough.

The report warned that the government is reliant on the market to achieve its housing aims and that it was not yet clear what the impact of Brexit would be on the market but that although there initially appeared to be a slowdown after the result in June, recent data points to modest increases in sales.

The NAO said one negative impact of government policy happened when the government announced a reduction in the rents housing associations and local authorities could charge of 1% per year. This led to a fall in the amount of revenue they could use to build new homes, an example of how “changes made in one area of housing policy can have impacts in other areas,” the NAO said.

Amyas Morse, head of the National Audit Office said: “The government has responded to this [problem] by putting in place a range of policies to increase housing supply and home ownership.

Central to this is an ambition to increase the supply of housing by one million homes by 2020, largely through support to private housebuilders. Delivery of this target will not require a substantial increase in current levels of housebuilding.”

The NAO said that first-time buyers last year paid on average 21% deposit, higher than 13% in 1990, although smaller than 28% they paid in 2009. However house prices have risen in many parts of the country since 2009, so in cash terms, first-time buyers are likely to still be putting down more.

 

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