The UK's lack of affordable housing is already having an effect on Brits up and down the country – but really this might only be the beginning. At HouseSimple.com, we decided to conduct a price study, looking at how home values have changed over the years and to try predict where they might go next. What it showed is that, if prices don't slow down (and wages don't pick up), the next generation could be spending ten times their annual salary on a property.
In England, house prices grew 1.4 times faster than salaries between 1970 and 1997. These figures then accelerated to 3.3 times faster over the next 20 years. If this momentum continues, the average house price will be over £1 million by 2037. When 2042 comes around, it’ll be £1.5 million – nearly ten times the predicted average salary of £163,514.
A history of high prices
This statistic may sound shocking, but house prices have been nearing the 'ten-times-the-national-salary' mark for years. In 2017, the average house in England cost £223,000 – 7.9 times the average salary of £27,195. This was a slight improvement on ten years beforehand– in 2007 houses cost 8.2 times the average UK earnings.
Home affordability in 2018
With house values rising and wages stagnating, it's likely that prices will rise to eight times the average UK salary this year. Housesimple.com CEO Alex Gosling says, "House prices won’t rise as sharply in 2018 as they have in previous years, but for many hopeful home buyers, the prospect of saving enough money for a deposit is still a distant dream."
London leading the pack
If this continues, by 2028 London will be the first city in the UK to have an average house price of £1 million. Average property prices across the capital are already close to half a million pounds (£496,000). In fact, London has already left the ‘ten-times-national-salary’ price tag behind – the average price for homes in the capital is now 14.5 times the national wage.
What this means for the next generation
According to Alex, "If house prices keep rising at the rate we’ve seen over the past few decades – and salaries can’t equate – it’ll become extremely difficult for future generations to acquire property, even with the financial help of their parents."
Unless something changes, it looks like Generation Rent is here to stay.