There are plenty of arguments for lifting the public sector pay cap but eMoov has added to the mix by highlighting the affect on nurses, doctors, police and firefighters getting on the property ladder.
Research by the online agent, looking at the period since the introduction of the cap during 2012, has found the average UK house price, based on Land Registry data, has increased by more than £50,000, up 31.12%.
However, at the same time, a 1% cap on public sector wages means that they have grown by just 6.03%.
In 2012, the average house price was £167,854, but the average public sector salary was just £25,060.
With a mortgage lender typically lending 4.5 times this wage and a 10% deposit of £16,785, a public sector employee could only afford to buy a property at a value of £129,556 – a difference of 29.56% between that and the average house price, the research shows.
Since then the gap has continued to widen, increasing by 29.59% in 2013, 37.27% in 2014, 41.61% in 2015 and 49.45% in 2016. So far 2017 has seen the largest gap emerge at 55.46% with the average house price topping £220,094, yet the average public sector wage has continued to stagnate at £26,571.
As a result, a public sector employee today can only secure a mortgage for a property valued at £141,579 when including the 10% deposit of £22,009, according to the research.
It gets even worse by 2020, when the cap is due to run to.
Based on the last three years of both house price and public sector wage growth, the average house price could be in the region of £263,940, with the public sector wage reaching just £27,581. If this were the case, then public sector employees would only be able to secure a mortgage on a property to the value of £150,507 with a 10% deposit of £26,394, a gap of 75.37%.
Russell Quirk, chief executive of eMoov, said: “The plight of today’s aspirational homeowner is a well-documented one, but it isn’t just a matter of age, and the year you were born, the sector in which you choose to build a career can also have huge implications on your chances of getting on the ladder.
“It is very disappointing that those arguably the most deserving of a foot up on the ladder are the ones left well off the pace.
“If the cap were to remain in place until 2020, the difference between salary, the amount of mortgage available and the average house price will be cavernous for those in the public sector.”
Comments (4)
It seems to me that this all boils down to the “must have it and must have it now” generation, so used to seeing something, clicking a button and getting it without worrying about how it can be paid for.
As others in comments above have mentioned, I along with my wife at the time were once in the position of wanting our own home. I’m sure that even then almost 40 years ago the “average” house was way beyond our reach so we looked at smaller properties that were within our reach and purchased a 1 bedroom flat that needed us to inject some TLC. After a couple of years we moved up to a 2 bedroom house not having thought about having children because we simply couldn’t afford (mortgage interest rates at 12+%!) As time went on, we became able to consider starting a family and looking at buying an “average” house but all in all that probably took 4 – 5 years during which time we both had second jobs and spent a lot of evenings at home in front of the TV rather than partying.
It doesn’t matter whether you work in the public sector or private sector, if you look beyond your means you will never be able to afford it!
I’m sick and tired of hearing about the public sector having a cap of 1% on their annual pay rises. I’m not for one minute suggesting that they don’t deserve more but personally I haven’t had an annual/cost of living (or whatever you want to call it) pay rise in over 10 years, and pretty much everyone I know is exactly the same. The only time I’ve got a pay increase is by working hard and getting a promotion or moving to another employer. Market forces affect us all, not just the public sector.
I remember when I started out looking to buy my first property I could not afford the “avarage” house but a below market property, a cheap property, small, needing work a so so area and even then it was two wages to pay for it. We were delighted. Went down the local autions to buy 2nd hand furniture, parents helped with pots and pans and that was us.
I think the put out expectation of buying your first home as buying an “average” on 1x wage property is misleading, first homes on the ladder are going to need work, they are likely to need 2x salaries, not so great areas, small, etc nothing wrong with that at all – you then work hard and move up the ladder to better properites and perhaps an “average” house. You dont start at “average” for your first house – well I and all of my friends didnt in the past.
If one is in agreement with this story could you please remind those effected that it was Labour that got them into this mess in the first place.