UK property prices out of reach for first-time buyers
Andy jalil –
For a great number of those looking to get a foot on the property ladder, owning their first house remains a distant dream. They have little choice but to continue paying high rents particularly in London. There is little comfort for them despite the current slow growth in prices which inched up just 0.6 per cent last month after having grown totally out of control. Figures published this month by major building society Nationwide showed house prices grew 4.5 per cent in the year to February, up very slightly from the previous month’s 4.3 per cent.
Price growth had dipped with jitters over Brexit following the months after the EU referendum but it didn’t take long for the growth momentum to return. Although prediction of post-Brexit doom and gloom in the housing market are fairly common these days, Nationwide was more tempered: It said a rise of two per cent over the course of this year is “more likely than a decline”.
Median prices for property in England have shot up 259 per cent since 1997, while earnings are up just 68 per cent making things difficult particularly for younger first-time buyers. The average worker needs to pay 7.6 times annual salary to purchase a house, rising from 3.6 times 20 years ago. In London, the ratio is even higher: The gap with the rest of the UK, which was small in 1997, is now huge. It is not surprising Britain’s home ownership rate has dropped to 62.9 per cent, the lowest in over three decades. That is eight percentage points lower than the peak in 2003.
Spokesman for the organisation, Shelter, Roger Harding said house building “has failed an entire generation”. He said: “In the last two decades, house prices have been growing nearly four times faster than average wages because our broken system of building homes benefits land traders and developers rather than families.”
He added: “A major reason is the cost of land which means developers build fewer affordable homes in order to make their money back”. Communities Minister, Sajid Javid has admitted home ownership is a “distant dream” for many young families and said government reforms would increase pressure on councils and developers to build more houses.
While property prices have increased more rapidly across Britain, growth in London slowed to just 6.4 per cent as reported last month, it is the lowest level for four years. Experts have predicted growth will grind to a halt at some point this year. The last time growth was so sluggish in the capital was 2013, according to Hometrack’s data. Luxury housing in the centre of the capital has become the biggest drag on growth.
Insight Director at Hometrack, Richard Dunnell, said: “When you consider house prices in London are 85 per cent higher than they were in 2009, it is not surprising that the pace of increases is slowing towards a standstill as very high house price increases mean affordability is stretched.” He added: “Growth in London has been superseded by larger regional cities such as Manchester, Liverpool and Birmingham.” Of course the average house price in the capital city is much higher at £486,400 compared with £220,846 in the rest of the UK.
Chief economist at Nationwide, Robert Gardner, said: “The outlook is uncertain, but we along with most other forecasters, expect the UK economy to slow through 2017 as heightened uncertainty weighs on business investment and hiring. Consumer spending, a key engine of growth in recent quarters, is also likely to be impacted by rising inflation in the months ahead as a result of the weaker pound”.
Adding to that was director of investments at property crowdfunding platform Property Partner, Rob Weaver: “As long as borrowing rates also continue at a historic low level then predictions for the year ahead are positive, although we probably won’t be seeing London house prices over the short-term racing in front with dizzying double digit rises.”
Stamp duty changes had rocked the central London housing market, as buyers became less keen to fork out thousands of pounds in transaction taxes for homes worth over £1 million. Asking prices on high-end homes in London’s most affluent boroughs, for example, Kensington and Chelsea, were slashed – some by as much as 30 per cent — as home-movers sought to shift their stock.