According to the most recent figures from the Land Registry’s House Price Index, the average price of a house in the UK fell by 1% in June, leaving current prices just 0.1% higher than they were 12 months ago. At this rate of decline it seems certain that next month will see house prices showing year on year falls. The current price of an average house in the UK now stands at £180,781 - still far out of reach of somebody earning an average salary, which stands at £23,764 before tax according to the Offiec of National Statistics.
Even a couple who were both earning the national average would still need to stretch themselves far beyond the traditional ‘three times your salary’ borrowing ratio to cover a mortgage of that size (and that’s assuming anybody would actually give them a mortgage in the first place).
The figures come at the same time as a report from housing association umberella group, the National Housing Federation, which claims that house price growth will pick up again in 2010 and by 2013 the average price of a house will have increased by 25% to £274,700. This sounds a little implausible to us - even taking recent falls into account, houses are still wildly unnafordable for most workers in the UK, it’s hard to see how anybody is going to afford them if they’re 25% more expensive, especially since the days of easy credit and high loan-to-value ratios are long, long gone and not coming back any time soon. Unless the average UK salary double over the next five years, there’s simply no way the market is going support those kind of price increases.
The report was put together by independent research outfit, Oxford Economics, so it carries some weight. But as we’ve said before, the professional financial experts have been wrong so many times before, it’s difficult to take their predictions with anything other than a big pinch of salt. In January this year Oxford Economics forcasted that average UK house prices would exceed £300,000 by 2010…
