The RICS said today that house prices will rise by a further 10% this year, despite the continuing slowdown of the market.
The institution’s Housing Forecast, published today, said that the steady increase in prices, caused by ever dwindling housing stock, would mean that residential property remained a safe bet for investors.
But it added that it would become increasingly difficult for first-time buyers to get a foot on the property ladder.
Instead, properties will continue to be taken up by buy-to-let investors, despite weakening returns.
Louis Armstrong, RICS chief executive, said: “While the housing market is providing a healthy investment for some, with house prices expected to continue to rise in 2004, many first-time buyers, particularly public sector workers, are unable to save the substantial deposit required to bridge the ever-widening financial gap.”
The report argued that key workers – including firefighters, nurses and primary school teachers, who are on average salaries of between £24,000 and £30,000 – would be unable to take out mortgages to buy a property.
The report stated that the average income of first-time buyers is £33,732.
It added that traditionally first-time properties have cost 3.5 times the salary of the average first-time buyer.
Prices are currently an average of five times higher, which will only be corrected by a 30% drop in house prices.
On average, first-time buyers can take out a mortgage loan which is 2.5 times their income.
In 2002 the average first-time buyer purchase price was £102,988 on a deposit of £23,095.
This is 23% of the total price, up from a low of just 10% in 1996.
The RICS calculated that a primary school teacher would need to raise a deposit of £25,768, while a nurse would require £41,524 and a firefighter would require a deposit of £42,850.
References: EGi News 14/05/03
