Money News
A Government think tank claims in a new report that UK house prices could rise to the equivalent of 10 times average salaries by 2026.
The stark projection comes from the newly-set up National Housing and Planning Advice Unit (NHPAU). Its remedy is a simple one - build more homes to boost supply.
NHPAU's forecast is based on the number of homes being built nationally staying at the projected 190,000 a year for the next decade. Given 168,000 homes are being built annually at present, its forecast may prove optimistic.
Professor Stephen Nickell, chair of the NHPAU, makes the point that first-time buyers have seen a significant rise in the deposit needed to buy a home and the amount of their income spent on mortgages. Nickell adds that demand for housing is growing and unless action is taken, pressure on the market will only get worse.
The figures for affordability examine the median earnings of the lowest 25% of earners, and the lowest 25% of house prices.
The NHPAU has been set up to advise policymakers on housing and comes after government's Barker review in 2004, which recommended a substantial increase to new house building to curb house price inflation.
08 June 2007 © Moneyextra.com
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