Average house prices across the UK have increased 5.1 times faster than average weekly earnings over the last five years.
The claim comes from the Resolution Foundation in response to the latest ONS House Price Index.
The think tank’s analysis of the data shows that house prices have increased by 36% since April 2011, while average weekly earnings have risen by just 7% over the same period.
This decoupling of house price and earnings growth has been even more striking in London and the south-east, where house prices have increased by 57% and 39% respectively.
While average weekly earnings have increased by 5% across the south-east, they have actually fallen very slightly in London – reflecting both reductions in bonuses at the top of the earnings distribution and strong employment growth in lower paying roles.
Even in Scotland and the north-east of England, where house price growth has been most modest over the last five years, it has been roughly double the pace of average earnings growth.
The Foundation says that post-millennial house price rises have led to a dramatic shift in housing tenure. Home-ownership rates have fallen from around 70% to 55% over the last decade for those on low to middle incomes. The proportion of people renting privately has doubled over the same period to 27%.
Lindsay Judge, senior policy analyst at the Resolution Foundation, said: “Runaway house prices have had a clear feed through to living standards in recent years. Most obviously it has priced people out of home ownership, pushing significant numbers into the private rental market.
“But rampant house price inflation isn’t just a problem for aspiring home owners. It has increased the stock of mortgage debt, and fuelled demand for renting that is driving up costs there too. Ultimately we all pay for house price inflation by spending a greater share of our incomes on housing.
“The solution to this housing crisis isn’t easy – especially in London. It will require radical action to both boost the supply of housing for all tenure types, and improve conditions and security in the UK’s private rental sector.”
“Lindsay Judge, senior policy analyst at the Resolution Foundation, said: “Runaway house prices have had a clear feed through to living standards in recent years. Most obviously it has priced people out of home ownership, pushing significant numbers into the private rental market.”
Ms Judge is missing two enormous factors here. Yes of course higher house prices have pushed people into renting but what about the mortgage market review meaning that many people cannot get a mortgage even if prices were considerably lower.
Then you have the enormous effect from immigration, where again people cannot get mortgages. In 2001 we had a population of 59.1 million but in 2015 it had grown a staggering 10% to 65 million and it is said that 85% of this growth is down to immigration. That incidentally is 5 million people!
In a recent article, the Times quoted Nigel Terrington, the Chief Executive of Paragon Mortgages: “Britain accepted 600,000 people into the UK in the year to June (2015). After 5 years almost 80% of immigrants are still in the private rental sector”.
Why do people ignore these facts? Government say they want to increase home ownership but unless they make mortgages easier to get for FTBs and foreigners then it just ain’t going to happen! Plus of course they claim to be increasing the number of homes built but it’s nowhere near enough! And if they’re so intent on this (a major political issue) then why isn’t the Housing Minister in the Cabinet??? His role was downgraded in the coalition Government and has not been reinstated, despite this being a hot political potato.
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