The average price of property in London will hit £1 million by 2030, according to new research by Oxford Economics. Massive growth in the population from 8.5 million today to 11 million in 2036, coupled with a failure to buildenough houses, will mean property is pushed well beyond the reach of ordinary workers in the city.
It warned that even factoring only modest wage growth in London – and assuming London prices keep pace with earnings rather than growing faster – average prices would still double in 15 years. It said: “If that happens alongside an increasing divergence between those with high and low incomes, then it will mean affordability problems for people on low incomes.”
London prices have been stagnating in recent months, and in some places have even dropped back, leading renters to hope that runaway house price rises were at an end and affordability was in sight. However, since then, a surge in prices has destroyed this hope. Halifax found last week that the average house price was up 8.5% in the previous 12 months, so that now a typical home costs five times more than the average earnings.
The Royal Institution of Chartered Surveyors said that house prices are now rising in all regions of the UK, and the supply of homes coming onto the market was lower than at any time since 2009. RICS’s head of policy, Jeremy Blackburn, warned: “The affordability and availability of homes in the UK is now a national emergency and addressing this crisis must be the priority for the new government.” Oxford Economics agrees that the only solution is to build more houses.
Unfortunately, the government is falling short in this department. It’s estimated that there needs to be between 220,000 and 300,000 new properties built each year to keep pace with demand, but there were only 137,000 new home starts last year – compared to a peak in 2006 of almost 180,000.
The new Conservative government has pledged to build 1 million new houses, but in the main, policies have been focused on increasing demand – by helping people borrow more in order to buy a home, and incentivising them to save more for a deposit.
The question is whether this is a good idea. Should the government be in the business of propping up sky-high prices, or should it focus instead on providing the new homes people need to live in? Let us know in the comments.