Report: Housing boom pricing many out of market
A new think tank, the National Housing and Planning Advice Unit, has produced a report which warns that the prolonged housing boom is beginning to cause social and economic problems because it has made many people, especially young people looking to buy for the first time, unable to afford a home. These problems are only likely to get worse over the next twenty years as demand grows and supply shrinks, the report says.
The report goes on to predict that by 2026, the least expensive quarter of homes will cost 10 times the average income of the poorest quarter of the population. The figure is now seven times the earnings of the poorest 25 percent of the population on average. At the high end, it is already at eight times the earnings of that segment of the population in London and the south of England, while on the lower end the figure stands at five times average in the North of England.
The predictions made by the report hold, it says, only if the number of houses built rises to 190,000 per year for the next ten years, from the 168,000 per year being built currently. The report estimates, based on government projections, that between now and 2030 there will be 223,000 new households created in the UK each year. Even at the levels projected by the report, the effect will be to push more people into private rentals, which will also push up rents, or into the social renting sector.
The chairman of the new unit, Stephen Nickell, admitted that the forecast is just that. He noted, however, that current conditions point in the direction of more house price growth. He also said that while house price growth could slow if interest rates rise, the boom is not likely to crash.
The National Housing and Planning Advice Unit is an independent, advisory non-departmental public body accountable to Parliament.