An Englishman’s home is his castle, so the saying goes, but very few Englishmen could actually afford a castle, set in an appropriate acreage, of course. However, the price of a more modest dwelling is increasingly beyond the reach of more and more British families as property prices rise and wages (virtually) stagnate. For many families, earnings have beaten inflation for once, not because wage rises have been particularly generous but rather because inflation is at record low levels due to a combination of factors. However, this does not apply to house price inflation.
According to the Nationwide Building Society, a provider of mortgages, house prices rose by 0.8% in December compared with an increase of 0.1% for November. Nationally, the values of properties increased by 4.5% in 2015. Average wages enjoyed their best gains for six years in 2015 and increased by 2.9% - meaning that home ownership became less affordable for most aspiring purchasers in 2015. The average figure for a typical UK property (not that such a thing really exists outside of a statistical analysis) rose to £196.999. A comparable figure for a flat is said to be £186 325 now. Average annual earnings are estimated to be approximately £26500 (before tax).
The Halifax bank estimates that the rise in house prices in the UK is twice the Nationwide’s estimate with its data indication a 9% hike in the year to November.
The increase in housing prices is not uniform across the UK with prices in London and the South East increasing in an even more pronounced manner than the rest of the country (in fairness, there are a few locations where the price has actually fallen over the past year – parts of Wales, for instance). According to Nationwide’s figures, London saw a 12% hike in property prices over the year (from an already high base). London prices have now risen to 50% above their pre-financial crisis peak (in 2007).
Whilst there are many high earners working in or near London, the vast majority of people are on typical wages and have been priced out of home ownership in even the most affordable regions of the capital. Hopefully, it will have escaped nobody’s attention that the trigger for the Global Financial Crisis was the sub-prime mortgage lending boom…