Affordability of housing in the United Kingdom
The affordability of housing varies widely across the UK: house prices and rents will differ as a result of market factors such as the state of the local economy, transport links and the supply of housing.
Growth of house prices
Land Registry figures for England and Wales show that house prices tripled in the 20 years between 1995 and 2015. Growth was almost continuous during the period, save for a two-year period of decline around 2008 as a result of the banking crisis.
The gap between income and house prices has changed so much in the last 20 years that even in the most affordable regions of England and Wales buyers are forced to spend six times their income, while in London the median house now costs 12 times the median London income.
This compares to the situation in 1995 where a homebuyer earning the median salary for their region would have had to spend between 3.2 times and 4.4 times their salary on a house, depending on where they lived.
In London in 1995, the median income was £19,000 and the median house price was £83,000, meaning that people were spending 4.4 times their income on buying a property. By 2012-13, the median income in London had increased to £24,600 and the median London house price had increased to £300,000, thus people were forced to spend 12.2 times their income on a house.
However, in 1995 the Bank Base Rate was 6%, but was cut to 0.5% in March 2009, where it has remained to date (September 2015). The resultant cheap mortgages have partially ameliorated the affordability issues, but only in a small way.
Reasons for growth in prices
Many economists argue that planning restrictions are a major factor behind the rise in prices as 70% of the cost of building new houses is the purchase of the land (up from 25% in the late 1950s).
Growth in cost of moving
The barriers to entry detailed above have been accompanied by substantial increases in the cost of relocating, making discretionary moves unaffordable in many cases. The principal element of this cost is Stamp Duty Land Tax. Campaigners such as Homeowners Alliance, the Taxpayers Alliance and Stamp Duty Reform UK, argue for the abolition or reduction of this tax.
- Great Recession
- Help to Buy
- List of entities involved in 2007–2008 financial crises
- Real estate economics
- Subprime mortgage crisis
- It's Land, stupid, Inside Housing
- SERC: Spatial Economics Research Centre: Does stamp duty stop people moving house?. Spatial-economics.blogspot.co.uk (2012-07-24). Retrieved on 2013-08-12.
- Homeowners Alliance, Homeowners Alliance, 2013.
- Stamp Out Stamp Duty, The TaxPayers' Alliance, 2013. Retrieved 15 September 2013. Archived here.
- Stamp Duty Reform UK, Stamp Duty Reform UK, 2013.
- Stamp Duty Calculator
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