The National Housing Federation has forecast that house prices will continue to rise, increasing by 40% in only the next five years. This would take the value of the average property over £300,000. The Federation says this is likely to happen in spite of the government’s plans to increase its house building rate.
Since 1997, incomes have risen by 35%, but house prices have rocketed by 156%. The Federation sees this pattern continuing into the future, with house price rises outstripping wage increases.
The figures were compiled for the Federation by independent analysts Oxford Economics. They predict that the current round of interest rate rises will slow the housing market down in 2008 and 2009, but this will be followed by a new housing boom.
The current average price of a property is £213,500 in England (which the study covers). This will rise to £302,400 by 2012 – an increase of £88,900 or 41%. Year by year the increases are forecast to be 2.2% in 2008; 3.9% in 2009; and then a pick-up in the pace of rising prices: 8.9% in 2010, 10.9% in 2011 and 10.4% in 2012.
The report is called Home Truths. Part of it states: ‘Unless we do something radical about housing supply, our housing market will continue to be distorted and dysfunctional. A generation of would-be homeowners will have their hopes dashed.’
The statement is on behalf of the social housing sector, which purchases affordable homes for the more needy section of the population to buy and rent. The report says that the government needs to fund the construction of 70,000 new social homes each year, but this is a massive 75% increase on the numbers on the government’s current programme which suggests they are looking to build only 40,000 new social homes every year. The report suggests a target of three million new homes by 2025 are needed.
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