Housing Market: Difference between revisions

However once the increase in house prices outstrips most buyers ability to buy and where the demand outstrips demand, the market will tend towards a rental market where those with large amounts of capital can exploit those with little or no capital. A [[Housing - Rental Market|rental market]] is not a bad thing in itself, but it must be guaranteed by a good supply of properties and legislation that ensures reasonable protection of the tenant.

'''Figure 1''' shows house price inflation by area. The average for the UK is 27%, but this varies widely across the UK regions. Greater London has seen the highest house price inflation (61.53), as would be expected, while Scotland has seen the smallest increases at just 2.82%. The graph also includes where wages shouldhaveshould have been by 2018<ref>Wages growth https://www.bbc.co.uk/news/business-45487695</ref><ref>Institute for Fiscal Studies - 10 years on, have we recovered from the crash - https://www.ifs.org.uk/publications/13302</ref>, or rather how far they are behind where they would be if the economy had carried on growing. Residents of London are the hardest hit in terms of getting on the housing ladder as their wages have not kept up with general inflation while house prices have soared. Areas around greater London have also seen fairly high house price inflation, which could be partly explained by increasing house prices in Greater London pushing more buyers further out from London.

'''Figure 2''' shows actual real drop in wages if inflation is taken into account.<ref>Wage growth in real terms - https://www.theguardian.com/business/2018/sep/12/uk-wages-have-not-yet-recovered-to-pre-crisis-levels-says-ifs</ref> This shows a more realistic view of where wages are compared with 2010. The figure represents an average across all age groups and the figure is skewed by the older population seeing small drops in income. The loss in real income amongst the 30 to 49 year olds is much higher at over 7%. This amounts to £2100 reduction in salary. So in this respect the figure 2 graph understates the growing gap between wages and house prices. In the 30 to 49 age group though it may well be that they have managed to put savings aside to pay for a deposit. Also those in the 30 to 39 age group are more likely to be on or above the national average wage. Historically somebody buying a house at 30 would have expected wage growth over the following 10 years. This often meant that a couple would buy house prior to having a family and as their family grew so would their wage to ensure that the mortgage payments form a smaller and smaller percentage of their income. With wage contraction this is no longer the case. A couple buying a house will find their income reducing as their costs rise. If there is any upward movement in interest rates, the markets are now heavily exposed to mortgage defaults. It is difficult to envisage that the UK housing market could weather a [[Brexit - Hard Brexit the Reality| hard brexit]]. Any downturn in the UK economy where families are mortgaged up to the hilt could create a cliff edge collapse in housing prices.

In '''Figure 3''' we see the impact on home buyers due to house inflation and declining real term wages. The table is based on national averages<ref>UK House Price Index - https://www.gov.uk/government/news/uk-house-price-index-for-january-2018</ref> and in some areas it will be worse than others. It is difficult to see that there is a scenario where it will be better. In the regions where house inflation has been lower, this is a reflection of poor job opportunites and well paying jobs are more difficult to come by. The table compares the situation for house buyers in 2010 with 2018.