Horrible. Desperate. Dire? You can pick your own favourite adjective to describe Britain’s miserable housing market (there’s another for you).
The Office for National Statistics (ONS) is just the latest body to raise the issue of affordability – or rather, the complete lack of it – facing prospective first-time buyers.
The affordability ratio of the median (middle) average house price to disposable household income, it said, stands at 7.9 in England, 5.4 in Wales, and 5.3 in Scotland. Northern Ireland, at 4.6, is something of an outlier – though in a good way, as it’s the result of rising incomes in the country.
The ONS said this means that in Wales and Scotland, a median-priced home is affordable for only the top 40 per cent of households in terms of income. However, in England it is restricted to the top 10 per cent. The average London home isn’t even manageable for (most of) that cohort. The capital’s market is, according to this analysis, open only to hedge fund managers, top bankers and CEOs.
Now it should be said that Paul Johnson, the economist and former director of the Institute for Fiscal Studies, quickly took to X (Twitter) to critique the agency’s figures. He argued that it uses a “silly measure of income” to calculate affordability, while pointing out that deposits aren’t factored in to its calculations. It isn’t, after all, just the top 10 per cent of earners who are buying in London.
However, even taking into account Johnson’s criticism of the ONS, the capital’s housing market is still a miserable hellscape, as anyone trying to navigate it would be only too happy to testify. Johnson admit affordability is “an issue” and if you don’t like the ONS figures, those from Nationwide, the building society, tell a similar story. In its recent house price index, Chief economist Robert Gardner pointed out that “an average earner buying the typical first-time buyer property with a 20 per cent deposit faces a monthly mortgage payment equivalent to around 35 per cent of their take-home pay, well above the long run average of 30 per cent”. The ratio of prices to earnings, he said, was “far above the long run average”.
As for the deposits mentioned by Johnson, the hurdle “remains high” according to Nationwide, all the more so in the current economic conditions in which the price of food is rising fast and bills are elevated. The Bank of Mum & Dad LLC, which often funds deposits, would be a hot growth stock if it had shares on the London Stock Exchange.
Anyone trying to buy today has my deep sympathy, particularly if they’re based in London. Crunching the numbers upon arriving home from viewings must be a thoroughly dispiriting experience.
Needless to say, high housing costs hit living standards and hurt the consumer economy. In fact, the Resolution Foundation, whose principle concern is lower income households, found that “the scale of Britain’s living standards slowdown over the past 20 years is so large that a typical family today would be £20,000 richer had incomes continued at the rate of growth trending in 2005”. The latter is the year in which the Foundation was founded.
Ruth Curtice, chief executive, said: “As we look ahead, the task of raising living standards across Britain is bigger than ever – we simply cannot afford any more stagnation.”
Preach, Ruth, preach.
I find the situation deeply troubling. My wife and I bought our first home in our early twenties, a time when our incomes were quite modest. That is extremely rare by today’s standards, when most people have to wait until their mid-to-late 30s.
Even then, we were told it was “a bad time to buy” by the mortgage advisor at the first bank we approached. Prices had been rising quickly. I’m nonetheless very glad that we ignored them and dived in. The market continued its surge such that the small flat we purchased in South Tottenham would have been completely out of reach for us had we opted to wait.
There is nothing quite like the security of owning one’s own home. I knew, when I was recovering from a near fatal road accident, when we weren’t at all sure when, even if, I would be able to work again because of the injuries I sustained, that our housing was covered. My family would have a roof over their heads. We could manage.
Some on the left argue that fretting about the home ownership prospects of those with capacity to buy is misplaced. The real problems are in social housing, where waiting lists are appallingly long and real anger is created when those who have council homes find their kids have to move miles away to rent themselves.
As bad as it is for would-be owners, it is much worse for people struggling to find any housing at all, on top of trying to buy food at inflated prices when the rent is due.
This criticism is misplaced. For a start, it ignores the aspirations of millions of people who are by no means high earners. If you talk to housing experts, as I have, they will also tell you that addressing problems in one part of the market helps the others. Increasing the number of people who can buy opens up the number of properties available for rent, easing rental prices in the process.
Social conservatives, meanwhile, fret about falling birth rates, and the perceived decline of the family. The recognition that Britain has a problem with demographics and an ageing population actually goes well beyond that group. Thing is, if you want people to have children, you have to provide them with secure places to live.
The UK housing crisis is thus existential. Fixing it would cure many ills, and ease the simmering unhappiness, if not outright anger, that leads voters to lash out by turning to populists at the extremes.
Despite its claims, I’m still not sure the current government truly gets it. At least not yet. True, it would hardly be alone in that. This is a longstanding issue. But that is not a good excuse.
It is time to get building. Not next week. Now.
