House Prices Rise over Five Times Faster than Wages
The average house price in the UK has risen over five times faster than average weekly earnings in the past five years, according to analysis of the latest Office for National Statistics (ONS) data by the Resolution Foundation.
The study found that house prices have increased by 36% since April 2011, while weekly earnings have risen by just 7% over the same period.
This separation between house price and wage growth has been even more marked in London and the South East, where property values have surged by 57% and 39% respectively. However, the average weekly salary has only risen by 5% in the South East, and has actually dropped in the capital – the product of reductions in bonuses at the top level of earnings and strong employment growth in lower paying positions.
Even in Scotland and the North East – where house price growth has been the lowest over the last five years – property values have roughly doubled the rate of earnings inflation.
The Resolution Foundation claims that this post-millennial surge in house prices has caused a dramatic shift in housing tenure. Homeownership has fallen from around 70% of all households in low to middle incomes to 55% over the last decade. The proportion of people renting from a private landlord has doubled over the same timeframe, to 27%.
The Senior Policy Analyst at the Resolution Foundation, Lindsay Judge, comments: “Runaway house prices have had a clear feed through to living standards in recent years. Most obviously it has priced people out of homeownership, pushing significant numbers into the private rental market.
“But rampant house prices inflation isn’t just a problem for wannabe homeowners. It has increased the stock of mortgage debt, and fuelled demand for renting that is driving up costs there too. Ultimately, we all pay for house price inflation by spending a greater share of our incomes on housing.
“The solution to this housing crisis isn’t easy – especially in London. It will require radical action to both boost the supply of housing for all tenure types, and improve conditions and security in the UK’s private rental sector.”