Imagine, if you can bear it, that you are a first-time buyer in the UK. You go to look at a 500-square-foot box masquerading as a two-bedroom flat in an average sort of area masquerading as an up-and-coming part of London. It’s a new build — one you can just about imagine downgrading your lifestyle expectations enough to live in. The problem is that you can’t quite afford it. The good news is that your Chancellor is behind you on this one. With you all the way. George Osborne really wants you to be able to buy a house. So here’s the question. Would you like him to help you do that by interfering with the market to ensure that you are offered a long-term loan you wouldn’t normally have been able to get? Or would you prefer that he didn’t interfere with the market at all, but prices fell to a level, relative to your income, that you could actually afford, and you got yourself a mortgage you could also actually afford on your own merits? I’d go for the latter and I rather imagine most first-time buyers would too. Sadly it isn’t an offer Osborne is planning to make — for the next couple of years at least.
Look at a long-term chart of UK house prices and you will see immediately what I mean. Houses have long cost, on average, just over 3.5 times the average salary. In previous booms, the multiple has risen to well over four times earnings, before reverting. Booms would be followed by busts and prices would crash before calming. Not this time. The graph shows houses soaring to six times earnings in 2007. Then there is an initial sharp fall in the ratio to just over five times followed by… nothing. Instead of continuing to fall, average national house prices have stayed at just over five times the average annual salary.
Comments
Join the debate for just $5 for 3 months
Be part of the conversation with other Spectator readers by getting your first three months for $5.
UNLOCK ACCESS Just $5 for 3 monthsAlready a subscriber? Log in