The average price of a property in the UK has increased by 6.7 per cent in a year and now stands at £288,000, according to figures from the Office for National Statistics (ONS). England enjoyed the highest rise with the average price of a home standing at £301,000 – an increase of 7.3 per cent.
Whilst this is welcome news for existing home owners, it is not such good news for those wishing to get on the property ladder. Apparently experts warn that house prices are rising three times faster than wages are increasing. They fear that owning a property could soon be out of reach for many ordinary workers, particularly those living in London and the South-East.
The runaway house prices are largely due to demand outstripping supply. The lack of houses on the market is causing problems for buyers and also estate agents. Figures from the National Association of Estate Agents show that each branch has an average of 37 properties on its books compared to 72 in December 2005.
However, the number of people registering an interest in buying property in each branch is about 374 compared to 302 in December 2005. So there is just one property available for every 10 people interested.
To ease the crisis and to help first-time buyers, the Government has vowed to build 400,000 homes by 2020, which includes ‘right to buy’ schemes and starter homes, which is certainly a step in the right direction.
However, the problem has been exacerbated by the hike in stamp duty for buy-to-let investors. From April this year, stamp duty will increase considerably. If you take the national average price of a property at £218,000. Until April a buy-to-let investor or second-home owner will pay £1,860 in stamp duty but from April it will be £8,400.
Not surprisingly, many investors have rushed to buy property before the April deadline, which has also contributed to increased demand at a time of a shortage of suitable housing on the market. The stamp duty hike saw a 44 per cent increase in the movement of the market in December.
It’s not just property buyers who are suffering. Workers in the most economically buoyant parts of the country, namely London and parts of the South-East are spending up to 78 per cent of their income on rent. Median rent in parts of London stand at £1,400 a month compared to £625 for the rest of the UK.
The high rents are forcing more people out of the Capital as they are prepared to tolerate longer commutes because London rentals are too high for them. When the Crossrail railway opens for business in two years, it will bring an additional 1.5 million people within a 45-minute commute of London from 40 stations west of London as far as Reading and south-east of London to Abbey Wood.
This will drive commuters even further away from London, which will lead to increased demand for housing and put pressure on prices. Towns such as Reading have already seen prices soar by 14.6 per cent in the past year. This will, in turn, drive rent increases in these locations which could force people who already live and work there to look further afield. And so the problem continues . . .