The stark disparity in house prices and average earnings comes as a warning sign a month ahead of the Government’s next Budget.
Jan Crosby, head of housing at KPMG, comments on today’s ONS house price figures:
"While today’s ONS house price statistics show an unsurprising growth of 6.7% in the year to December 2015, it is perhaps more interesting to look back even further. In 2005, the average price of a home was £186,000 – by 2015 it was £288,000. An increase of over £100,000, or 55%, in just ten years is concerning when it’s clear that the market shows no sign of slowing. Taken with the 19% growth in average earnings over the same period, it not only highlights the disparity, but also the importance of maintaining low interest rates for affordability – when rates rise housing will only become even less materially affordable. In 2005, average annual earnings were £18,949 and by 2015 the ONS recorded them as £22,487.
“This stark disparity comes as a warning sign a month ahead of the Government’s next Budget. While the current government has been vocal in its commitment to tackle the housing crisis, especially around home ownership, it must be hoped that these latest figures are another reminder of the continued need to take action. We’ve seen demand-side measures introduced, such as Starter Homes and the Help to Buy ISA, but unless we see more on the supply side the crisis will only worsen. We need more to be done on releasing public land, further unravelling of planning red tape, viable boosts for smaller and self-builders and increased powers given to local and regional bodies to expedite the process of building new homes. If we don’t see reform in these areas, in another ten years the gap between house prices and earnings may have become truly impassable.”
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