Average families unable to afford two-bed house
THE average Jersey family cannot afford a mortgage on a two-bedroom house – and getting onto the property ladder has become harder in the past five years, new figures show.
Rising property prices, which have outpaced wage increases, mean that in the past five years an average working household has not been able to service a mortgage affordably on an average-priced house of any size. And although housing affordability in Jersey last year was essentially unchanged compared to 2016, in the past five years it has worsened by seven per cent.
The figures come after the JEP reported last month that Jersey’s housing market was experiencing a boom similar to pre-recession activity, with some properties being snapped up within 24 hours.
Due to the demand, house prices have soared and a three-bedroom house now costs on average £525,000 and a four-bedroom house £755,000.
According to the Housing Affordability in Jersey 2017 report that was published this week, mortgage payments should not be more than 40 per cent of a household’s net income – the amount of earnings left after all deductions such as taxes are taken out. Payments made at a higher rate would result in the household falling into ‘mortgage stress’, leaving the homeowner struggling to pay bills, for food and for day-to-day living expenses.
The report assumes that the average net household wage is £54,000, that the buyer has a cash deposit of ten per cent of the purchase price and that the buyer is financing a 90 per cent mortgage at a variable interest rate for a term of 25 years.
‘The affordability of all houses increased during the period of 2008 to 2013, again driven by falls in median price and lower mortgage interest rates,’ the report states.
‘More recently, increases in the median dwelling price of those properties have resulted in worsening affordability.’
The report has also calculated that a household with an average income would require a £193,000 deposit to be able to purchase an average-priced three-bedroom house and still be able to service a mortgage affordably.
Similarly, a deposit of £423,000 would be required to service a mortgage for a four-bedroom house.
According to the report, an average working household is able to afford a mortgage on an average-priced one- or two-bedroom flat.
Housing Minister Sam Mézec could not be contacted for comment.