UK House prices set to rise for the next 50 years, continuing to outstrip incomes, warns ex-Bank of England economist
UK House Prices Set To Rise For The Next 50 Years; continuing to outstrip the average income which won’t keep pace with the escalating cost of housing. Therefore, the continued property price rise will put home ownership out of reach of millions of Britons. Professor David Miles, a former member of the Bank of England’s monetary policy committee, says the shortage of housing and a restriction on the availability of land in the UK will mean house prices keep spiralling upwards for decades to come. Miles evealed analysis showing that ‘extraordinary’ house price inflation over the past 30 years was likely to continue as UK house prices set to rise for the next 50 years. Furthermore, ‘It’s been an extraordinary period of rising house prices’ Said Miles. Worse, he warned that median salaries in the UK were unlikely to keep pace with rocketing house prices. Therefore putting home ownership even further out of reach for aspiring buyers. UK house prices have gone up relative to goods we buy but also relative to incomes. It’s been an extraordinary period of rising house prices. ‘The question is can we expect the next 40 to 50 years to look like the last 30 to 40; house prices rising for a sustained period into the future? I think it not implausible that this might be true.’
House Prices Continue to Grow Faster Than Wages
House prices have risen from an average of £9,767 in 1973 to £205,936 today according to figures from Nationwide. According to estimates from the Office for National Statistics; average salaries meanwhile have risen from £2,170 in 1973 to £28,200 in 2016. This means that on average people needed 4.5 times their salary in the late 1970s to buy a hom e. In comparison, today, they need 7.3 times.
Rising Prices Mean Increased Borrowing
In London and the South East where house prices are especially high. Therefore drastically pushing up the required borriwing to fund the purchase of their home. The latest figures from the Council of Mortgage Lenders show that the average loan-to-income multiple of a mortgage in London has now hit a landmark, four times. This is a record high. The average mortgage loan amount to earnings in London has hit a landmark four times Miles said: ‘It’s not at all difficult to write down what I think is a plausible economic model that shows what we’ve seen over the past 30 to 40 years, of rising house prices relative to incomes, actually continues into the future.’ And he added: ‘It’s very difficult to work out whether rising house prices relative to incomes are just a bubble that has to reverse itself or is it simply a continuation of the equilibrium path that we are on which is almost inevitable if population and average incomes continue to rise?’ The government is expected to publish a white paper in February 2017, which will lay down housing plans, on building more homes to ease the UK’s housing supply shortage. Lobbyists have suggested that house builders should adopt, more modern construction methods if they are to be able to deliver anywhere near enough new build homes to meet growing demand. But Miles warned that to keep a prevent continuing rising prices; construction would also have to address the lack of available land to build on. Thereofre, he suggested a solution, was to build ‘up’. ‘Making very slight changes to the availability of land, to substitute away from land footprint in favour of building up, can dramatically change the trajectory that house prices are likely to follow in relation to incomes.’ Click Here to see our portfolio of Buy-to-let properties for sale.
