Here, in a devastating prediction, property expert Jonathan Rolande delivers a sobering warning – things are going to get worse.
Few things in life are as important as the roof above your head. But for those lucky enough to own a property, the price tag it comes with is beginning to look more and more unsustainable.
How unsustainable? Well, according to a National Housing Federation report out earlier this month, one in five households in England will have homes costing more than a third of their income by the end of this decade.
In just six years’ time, every 33p in the pound we earn will go towards that roof above our head. So you are basically working until around lunchtime every day just to pay the rent or mortgage. Enough to put you off your sandwich, if you decide you can afford to take a break.
I did some number crunching and the results really shocked me. Right now the average UK income is £32,000 gross, which is around £2,666 per month. That becomes £24,000 or £2,000 a month after tax.
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At the same time the average house price in the UK is now £280,000 and the average monthly rent is £1,260. An average mortgage meanwhile comes in at about £185,000 which – when paid back via an interest only agreement – works out at about £920 pcm.
It means the average house is now nine times average gross salary to purchase. And the average home rental is 65 percent of average net pay.
Things are improving very slowly due to a combination of small wage growth and falling house prices. But those renting are not so lucky. In fact rents have increased in most places – as much as 11 percent in London.
With the “new normal” of higher interest rates, prices will need to fall a lot further to redress the increase which has hit affordability. But this doesn’t look likely, so rates need to fall or wages increase – or both – to help the affordability gap.
If no long-term plan is put in place I fear things will get much worse. In 20 or 30 years’ time, property costs could eat into our wages to an even greater extent.
The stakes here couldn’t be higher. About 310,000 children are expected to live in emergency accommodation such as B&Bs and hostels by 2045. This is more than double the 131,000 in 2021 and equates to one child in every school class in England.
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A third more families (350,000) will be on council housing waiting lists by 2030. By 2045 this will rise to 1.8 million households, up from 1.1 million in 2020, the study predicts.
These statistics sound more like something from Victorian London or the aftermath of World War II, not 2023 in the 6th largest economy in the world. The ongoing crisis in available housing is only going to become more acute and it’s being driven by demographic, economic and political social factors.
There has been massive population growth in the last few decades with seven million more people in England than there were in 1997.
Running parallel to this we’ve seen a fall in housing stock, and a particularly large loss in levels of affordable housing. House building has simply not kept up with demand. Inflation has added to the problem too. Not only has there been massive house price inflation in recent years. More recently, cost of living inflation has made expensive houses more difficult to afford.
Governments of both parties have done their bit to worsen the crisis over the years too, by either brushing the problem under the carpet or doing things that have made it worse.
This housing crisis has brought with it some really serious consequences. The most obvious one is housing affordability. Significant numbers of people are struggling to buy or even to rent these days. Some cannot afford to at all which only creates further issues including sub-standard accommodation, overcrowding, housing insecurity and homelessness.
A continued housing crisis also risks creating wider economic instability. High housing costs in many places means people cannot afford to take some jobs, or cannot afford to live in the places where the jobs are. More lately, high housing costs have begun to hit consumer spending across the economy.
It has widened inequality. For the wealthier – or perhaps those supported by the bank of mum and dad – it is still possible to own property. For the less affluent it has probably never been more difficult in modern times.
This chasm has exacerbated social tensions and has reduced social mobility. At the same time it has made it harder for people to move to areas with better job prospects or to access education or healthcare. Many people will also delay starting a family if they have insecure accommodation.
So don’t owe it to future generations to help solve this crisis? Or do we want to condemn a whole generation to a life struggling to keep their head above water… and a roof over their head?
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