Britain’s housing shortage is so bad, property prices are going to continue to skyrocket for at least five more years.
But for those who can’t and will never be able to afford to buy their own home, the latest set of news from the Royal Institution of Chartered Surveyors (RICS) is even more depressing.
RICS forecasts rents could rise by an average of 5% each year for the next five years. That’s more than what house prices are estimated to rise at over the same period of time — 4.7% annually.
So those who can’t get on the housing ladder and have given up all hope are stuck renting and therefore lining the pockets of the landlord. In other words, they have no choice but to pay the going rent or move somewhere else where rent is cheaper.
And what’s to blame? There are not enough houses to sate rampant demand. RICS warns that nothing the government is doing is appropriately compensating the lack of supply. Here’s what Jeremy Blackburn, RICS Head of UK Policy said in a statement(emphasis ours):
There have been many welcome supply side measures in the Productivity Plan to balance the likes of Help to Buy. The brownfield fund, local plan enforcement and new development corporations should help get more homes built, and the passage of the Housing & Planning Bill is key.
We still, however, need to help councils, housing associations and community land trusts get building in order to get anywhere close to a co-ordinated and coherent strategy across all tenures.
Ramping up housing supply is positive, but homeownership should not be the only game in town given the amount of private rented accommodation we need. A mix of market and rented housing is required and Starter Homes should not be seen as the panacea to solving the housing crisis, but as forming part of a larger mix to meet the wide range of housing need the country is crying out for.
Last month, RICS said 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%). This was a little less that it predicted in its report today. The chief economist at RICS said that property will become increasingly “unaffordable” during this time.
It makes sense. If Britons’ wages are not rising as quickly as how house prices (to buy or to rent) are — how are they going to afford it?
And all data points towards supporting RICS’ assessment.
A housing research report commissioned by an estate agents group says that property prices are going to rise by 50% within the next decade and rent will rise by 27% to £171 per week.
However, London house prices are predicted to nearly double within 10 years.
The National Association of Estate Agents and the Association of Rental Letting Agents pegs the average house price in Britain at £280,000 and says prices will rise to £419,000 by 2025. London house prices are predicted to nearly double to £931,000.
“House prices are only going to go one way, and unfortunately that is up. For so many already priced out of the market, this is news aspiring house buyers will not want to hear,” said Mark Hayward, managing director of the NAEA, in the report.
“Ongoing house price inflation, combined with low wage inflation, tighter lending restrictions and a shortage of affordable housing, means owning a home will continue to be a distant dream for many.
“Increased rental costs will also make it more difficult for current renters to save for a house deposit; as much of their income will be eaten up in rent.”