10 Reasons You Can’t Afford to buy a House?

Summary

The UK housing crisis has been exacerbated by a combination of factors, including restrictive building regulations, soaring demand, and a lack of affordable housing. Despite growing population pressures and rising wealth disparities, house prices have soared by over 1,000% since the 1960s. The government’s attempts to address the crisis with ambitious housing targets face obstacles like skilled labor shortages and private sector profit motives. Solutions such as high-density housing and tax reforms show promise, but overcoming political inertia and vested interests will be key to making meaningful change in the future.

Takeaways

• 😀 The average house price in the UK in 1960 was £2,100, equivalent to £65,000 in today's money, making home ownership much more affordable at the time.
• 😀 Real house prices have increased astronomically, with a 1,000% rise since the early 1980s when adjusted for inflation, and a 300% rise in real house prices.
• 😀 House prices in the UK have reached a ratio of nearly 8.5 times the average income, the highest level since the Victorian era.
• 😀 One of the primary reasons for unaffordable housing is the UK's significant restrictions on building new homes, including strict planning and zoning regulations.
• 😀 The UK is facing a housing shortage, with 4 million homes missing, largely due to insufficient house building compared to European standards.
• 😀 The UK's population has grown by 10 million over the past 20 years, largely driven by net migration, which has further strained the housing market.
• 😀 Despite government plans to build 1.5 million new homes over five years, there are significant challenges such as a shortage of skilled builders and a reliance on the private sector that may not lower prices.
• 😀 The housing market is also hindered by stagnant housing stock, with 600,000 empty homes and millions of underutilized homes, exacerbated by issues like high stamp duty and council tax policies.
• 😀 Government policies, like help-to-buy schemes, have made it easier for people to borrow more, but this only pushes house prices up rather than addressing the underlying issue.
• 😀 Wealth, including inherited wealth and parental support, plays a significant role in determining homeownership, contributing to a widening gap between the haves and have-nots in the housing market.
• 😀 The cost of building new homes has increased significantly due to inflation and new environmental regulations, while the UK remains hesitant to embrace high-density housing solutions like apartments.
• 😀 Some cities, like Minneapolis and Austin, have successfully tackled their housing crises by increasing supply and encouraging higher-density housing, offering a potential model for the UK.

Q & A

What was the average house price in the UK in 1960, and how does it compare to today?

In 1960, the average house price in the UK was £2,100, which is roughly equivalent to £65,000 in today's money. Despite lower salaries, houses were more affordable at that time compared to the astronomical increases in prices seen today.

How much have house prices increased in the UK since the 1980s?

Since the early 1980s, house prices have increased by 1,000% when adjusted for inflation, and by 300% in real terms.

What is the current ratio of house prices to income in the UK, and how does it compare to historical levels?

The ratio of house prices to income in the UK is currently 8.5 times, which is the highest level since the Victorian era, surpassing the affordability seen even during the days of Charles Dickens.

Why are house prices in the UK so high despite economic growth and technological progress?

The high cost of housing can be attributed to several factors, including strict building regulations, a shortage of new housing, and high levels of population growth, particularly due to migration.

What role does the UK’s planning system play in the housing crisis?

The UK's restrictive planning system, including Green Belt regulations and local authority veto powers, has hindered the construction of new homes. This has contributed to a shortage of housing in areas where demand is highest.

What challenges are associated with the UK government’s goal to build 1.5 million new homes in the next five years?

The government is unlikely to meet its target due to a shortage of skilled builders, potential issues with Green Belt reforms, and the private sector’s reluctance to build enough homes due to profit motivations. Additionally, government targets often fail, and building affordable homes can be less profitable.

How does the underutilization of existing housing stock contribute to the housing crisis?

There are about 600,000 empty homes and 8.8 million homes that are underutilized, such as properties with spare bedrooms. These homes are not being used efficiently, and factors like high stamp duty and outdated council tax rates discourage people from downsizing, which limits mobility within the housing market.

How did the private sector's involvement in housing construction change over time?

Since the late 1970s, the social aspect of housing construction has declined, with local councils no longer building homes at the same scale as in the post-war era. The decline in council house building and the sale of council properties under the 'right to buy' program has exacerbated the housing shortage.

What impact do mortgage interest rates have on the housing market?

Historically low mortgage interest rates, especially in the 2010s, have made it easier for people to borrow larger sums of money, thus fueling demand and pushing up house prices. However, this has led to a cycle where higher borrowing capacity only exacerbates the affordability problem.

Why has the ratio of house prices to income continued to rise despite concerns about overvaluation?

The rising ratio can be attributed to factors such as increased wealth (including inherited wealth and gifts), more joint mortgages, and foreign investment in property. These factors have allowed higher house prices to persist despite the growing disparity between wages and house prices.