If you think it’s hard enough to get on the housing ladder now or that it’s difficult to rent a decent place that doesn’t cost you most of your monthly salary — well, be prepared, it’s only going to get worse.
The Royal Institution of Chartered Surveyors revealed in its RICS Residential Survey for October that UK house prices are expected to rise by 4.5% per annum, over the next five years (a cumulative increase of around 25%).
And this one sentence from the chief economist at RICS, Simon Rubinsohn, is utterly terrifying for anyone hoping that the extraordinary rise in property prices is just temporary (emphasis ours):
If the five year projections from members regarding the outlook for both prices and rents is anything to go by, property is set to become even more unaffordable going forward making the Government’s focus of boosting the delivery of new homes absolutely critical.
The key reason for this is the ever-widening gap between supply and demand in Britain. More and more people are looking to buy a property while not enough houses are getting built.
“It is hard to get away from the issue of supply when it comes to the current state of the housing market,” said Rubinsohn. “The legacy of the drop in new build following the onset of the global financial crisis is now really hitting home, with both the sales and letting markets continuing to show demand outstripping supply on a month by month basis.”
The Confederation of British Industry (CBI) warned last year that 240,000 properties need to be built annually, in order to accommodate rising demand across the country. Unfortunately, the annual increase in new homes has topped 200,000 only four times in the past 14 years.
RICS added “the supply of new stock to the UK market has been in decline since the middle of 2014, with the number of new instructions only increasing in one of these months.”
The Office for National Statistics said the average price to buy a house in Britain is now at £284,000 ($US431,874). Meanwhile, the average price for buying a property in London is now at £522,000 ($US793,849).
That means the average price for Britain is more than 50% higher from a decade ago, while prices are over 90% higher in Britain’s capital.
In September, Bob Pannell, an economist at the Council of Mortgage Lenders, wrote about how rises in purchase and rental prices are outstripping earnings and it’s causing a huge problem.
Recently, estate agent Savills added more fuel to the fire by saying “it is becoming clear that the current conditions in the UK housing market are unlikely to be a temporary phenomenon.”
“The market conditions we called ‘normality’ ten years ago will not be resumed anytime soon. The structure of the housing market has changed, if not permanently then at least for the foreseeable future.”
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