It is no secret that getting on the property ladder is a difficult achievement for many in the UK. But recent developments in the UK’s economic landscape – in some cases, directly influenced by shifts in government policy – have made it harder than ever for first-time buyers to become homeowners. The situation is so dire that even middle-earners are encountering significant hardship in purchasing property. But what does this mean – and how has it happened?
What Makes a Middle Earner?
The term ‘middle earner’ is by no means a prescriptive or precise descriptor. Rather, it is used by economists to refer to a bracket of working people that earn an average wage. Typically, the median average is used in this regard, but the numbers can vary widely depending on the source or study cited.
According to government data, the median wage in the UK as of April 2021 was £31,400 – a figure that some predict has declined in recent months, as the cost-of-living crisis has its own unique impacts on the employment market. However, other studies place the median wage lower. It is also important to recognise the skewing impact of rare, high-waged positions on median values, potentially putting middle earners above the mean average salary. “Then there’s also the issue of rising interest rates which, due to sustained inflationary pressures, look set to continue rising moving forward,” comments Ruban Selvanayagam of no. 1 homebuying firm Property Solvers.
Generally speaking, the median wage is used as a handy way to target a specific sub-class of working population, whether socially-mobile skilled workers or the growing white-collar worker population. ‘Middle earners’ describes a key majority of economically active citizen – and a useful lens through which to examine growing inequality.
The House Price to Income Ratio
Arguably the most impactful long-term factor behind the creeping affordability crisis is the house price to income ratio. In the 1970s and 1980s, a home could be purchased for around four times the average salary. Rampant market growth, coupled with stagnant wage increases, has resulted in the average property today costing more than ten times the average salary.
It is also worth acknowledging here the wider costs associated with buying up property. There are many additional processes that buyers have to account for, many of which can render property to risky or expensive even if a mortgage in principle has been granted. Buyers can make savings through shrewd comparison of quotes from conveyancers and other contractors, but stamp duty and estate agent fees can together scupper affordability nonetheless.
As the affordability crisis continues to deepen, is there any evidence that the government has been taking steps to redress the balance. Prime Minister Rishi Sunak has come under fire for his part in the rising of taxes as Chancellor during Boris Johnson’s premiership, and again seems silent on the crisis impacting many households today. But government programmes do exist to help first-time buyers, from LISAs – which top up savings by 25% if destined for a house purchase – to Help to Buy schemes.
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