Henman fist pump, guttural cry of "gerrin there" and a v-sign to Vish

DanielS · July 17, 2006

Average price estimated to reach £300,000 by 2012

· Typical property will cost nine times annual salary

John Carvel, social affairs editor

Monday July 17, 2006

The Guardian

Photograph: PA

The average house price in England will rise by more than 50% to top £300,000 within six years, according to econometric forecasts by the National Housing Federation.

It said the further boost to property prices might be reassuring for owners who borrowed heavily to get on to the housing ladder. But the federation, representing 1,400 housing associations, warned that it "spells disaster for tomorrow's first time buyers who will find it increasingly difficult to afford a place of their own".

The projections show the average house price will rise from just under £195,000 in the first quarter of 2006 to £303,900 by 2012. With average annual earnings forecast to reach £32,188 by that date, the average house will be nine and a half times salary.

The findings were based on an analysis by Oxford Economic Forecasting, an independent group whose housing market model is being used by the government to work out the policy implications of Kate Barker's review of housing supply.

The report said: "Young working couples, key workers and people on low incomes have little chance of fulfilling their home ownership dream without financial support from parents or the state.

"This can have serious social consequences for the birth rate, for keeping essential public workers in high housing cost areas, for government expenditure and for the UK's business competitiveness."

David Orr, the federation's chief executive, said: "We are already in a housing crisis and this report shows things are getting worse. High house prices are already having a disastrous effect on local communities. Over the next six years we'll see home ownership being pushed further out of the reach of middle earners and even those on relatively high incomes."

Mr Orr appealed to the Treasury to double the supply of affordable rented accommodation. He said housing associations build and refurbish about 40,000 homes a year for rental and low-cost ownership. To meet housing need, this should rise to 80,000 and the resources should be made available in next year's comprehensive spending review. There should also be reform of the planning laws to speed up the delivery of affordable homes in mixed communities, he said.

The forecast of the £300,000 house was based on an assumption that interest rates would average about 4.5% for the six years to 2012. According to OEF's analysis, there is enough spare capacity in the economy to allow growth to continue without triggering mortgage rate rises.

The forecasters expect earnings to grow between 4.1% and 4.4% a year over the period, but house prices will rise more quickly, with increases averaging 7% a year after 2008. The forecasters note that 154,870 new homes were built in 2004/5, but the government's latest household projections indicate a need to build an average of 209,000 new homes a year to satisfy demand over the next 20 years.

"The government's response to the Barker report seeks to raise housebuilding totals to 200,000 a year within 10 years. But, in the interim, we will continue to create an even larger shortfall of housing and struggle to create truly sustainable communities," the report said.

House prices were also being distorted by an increasing volume of buy-to-let. First-time buyers accounted for less than 30% of home purchases in 2005, compared with 50% in 1995.

The OEF concluded that, with short supply and high levels of consumer confidence, there would be nothing to stop the average house price climbing above £300,000. It noted that in more than 10% of local authority areas in England, average house prices were already more than 10 times local incomes.

Steve Wilcox, professor of housing policy at York university, said the OEF's forecasts appeared to be robust if the underlying economic projection was sound.

Home truths

· House prices in England rose 6% last year - three times CPI inflation

· Average house prices have risen by 139% since Labour came to power in 1997. Earnings have risen by 24%

· First-time buyers accounted for 30% of home purchases in 2005, compared with 50% in 1995

· 115,352 mortgage repossession proceedings were issued in 2005, a jump of 48% on 2004

· The number of households waiting for a suitable affordable home on housing registers is now more than 1.5m - a rise of nearly 50% since 2000

I agree/disagree with this article.

boohog · July 17, 2006

This post is not viewable to guests.

You can sign in to your account at the login page here