The era of surging property prices in Britain is going to come to an end imminently because buying a home is becoming simply unaffordable.
That is the assumption when you look at what a range of housing experts in Britain said to the Financial Times. Here are the key quotes from the report:
Paul Smith, CEO of the estate agency Haart:“We believe the nation has now neared the limit in terms of price rises.”
Richard Donnell, director of research at Hometrack: “There are plenty of headwinds facing London irrespective of the referendum vote. It’s down to affordability — at some point you have to run out of buyers.”
Henry Pryor, a buying agent: “How do you persuade people to buy something today that they think will be cheaper tomorrow?”
Basically the info from the range of experts, which you can read in full here, sets out a pretty damning indictment of how Britain’s property market is going to fare.
The average house price in Britain stands at £292,000 ($428,451), according to the Office for National Statistics. Property prices in London are even more colossal at £552,000 on average.
Over the last four years alone, property prices rocketed by 54% in London while prices across Britain jumped by 20%, according to the Land Registry.
Meanwhile, latest data from the ONS showed that wage growth slowed in the three months to February. Wages grew 1.8%, down from 2.1% in January, and far lower than the 2.3% growth expected by economists. On average, Brits currently earn less than £30,000 a year.
This is really screwing up the house-price-to-income ratio as in the London prices stand at 9.2 times average earnings, according to Nationwide data.
In other words, house prices are rising so high that people are taking on huge amounts of debt to buy a place and this is becoming simply unaffordable.
Macro-research firm Fathom Consulting illustrated this month how Britain’s property market is in for a crash because “property prices would need to fall by up to 40%, or household income grow at ten times its current pace for the next five years, in order to bring the ratio back to balance.”