Thursday, 11 April 2019

Has the minimum wage helped Chichester's first-time buyers?

The minimum wage increased on the 1st April from £7.83 per hour to £8.21 per hour (for over 25’s). But is this enough to help Chichester’s first-time buyers afford a property and how has their fate changed since the minimum wage was introduced some twenty years ago?

When the minimum wage was introduced in April 1999 (at a rate of £3.60 per hour for over 25’s) the average home in Chichester sold for just £110,598. Whilst the minimum wage has increased 128% since then, the average property price in Chichester has increased by 247%! This means whilst you had to work nearly 15 years in 1999 to afford a house in Chichester on the minimum wage (based on a 40-hour working week and ignoring tax) nowadays it would take over 22 years to do so.

Interestingly though, the greatest increase in property prices came immediately after the minimum wage was introduced. In fact, when the minimum wage was increased for the first time in October 2000 (by a measly 2.8%), house prices in Chichester had leapt by 32.2%! Only once out of the first five times that the minimum wage was increased was it raised by more than house price increases, whereas since then it’s been roughly an even split; with seven minimum wage increases being above house price inflation, and eight falling short of this.

I was quite surprised to see that in the past ten years the minimum wage has very nearly kept up with Chichester’s property prices; since 2009 the minimum wage has increased by 42% (from £5.80ph to £8.21ph) whilst house prices have increased by 43% (from £268,176 to £383,418). Even more of a surprise was that in the last five years the minimum wage has actually grown more than Chichester’s house prices, with the minimum wage increasing by 26% versus a 19% increase in property prices.

So, has the minimum wage helped Chichester’s first-time buyers? Well, unless it’s a coincidence, the introduction of the minimum wage coincided with a strong increase in house prices. The 2008/09 credit crunch brought things back into line somewhat and since then those on minimum wage haven’t actually lost out in the fight to keep up with house prices.

The problem is of course, that buying a property has largely been out of reach for those on the minimum wage in the past, and that continues to be the case now. Based on a 40-hour working week, today’s minimum wage (£8.21ph) equates to an annual salary of £17,077. Even in a dual-income household, which has become the norm, Chichester’s average home would cost some 11 times the joint income of £35,154 from two full-time minimum wagers. Access to a mortgage is therefore out of reach, and that’s before saving for the deposit and other costs associated with buying. It therefore seems a shame that hard-working people on the so-called ‘living wage’ would find it very difficult indeed to buy a home in Chichester.

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