The housing crisis only gets worse. A new survey shows that couples who want to buy their first home must first save the equivalent of three-quarters of their joint take-home pay. The Royal Institution of Chartered Surveyors calculates it would take a couple nearly seven-and-a-half years to save up the £29,200 needed to cover the deposit and associated costs if they put aside 10% of their income each year. This has soared since its low of two-and-a-half years in early 1996. So it’s no surprise that first-time buyers, who made up half the market a decade ago, now represent just a third of all transactions.
In early 1996, the average price of a British home was £51,000, according to building society Nationwide. Last month, that figure was £168,000. In London, the prices are probably double the UK average, making it impossible for anyone new to get into the housing market – unless they are very rich. According to building society Halifax, the average London house costs over 11 times the annual wage of ambulance staff and 9.5 times a nurse's salary - more than double the 3 to 4 times ratios considered by most lenders.
The desperate position that average wage earners face can be traced directly to the actions of the Tory governments of 1978-1997 and New Labour since then. Under the Tories, all the best council housing was sold off for a nominal sum and only the older, poorer stock remained. Councils were forbidden to build new homes as replacements. New Labour continued these policies - and made matters worse.
Investment in new affordable homes for rent built by housing association was cut back in favour of building for sale. The government would rather loan nurses money to take on a massive mortgage rather than offer them somewhere decent to live. So if you can’t get on the “property ladder”, then you either share or become homeless. If you are homeless, the local council will rent a property in the private sector because they have few of their own to spare. Last year, councils in London gave £600m in housing benefit to private landlords to house the capital’s 60,000 homeless households. As for those who think they are sitting pretty now, many are in serious difficulties after borrowing against the inflated value of their homes. When prices fall and interest rates rise, as is certain to happen, many will face debts greater than their asset and be unable to pay their mortgage. It doesn’t take a genius to see that the market “solution” New Labour has encouraged has benefited a few at the expense of the vast majority. No news there.
Paul Feldman, communications editor