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Thursday 7th June 2007
The availability of affordable housing has reached a "critical" point, with the next generation of home buyers likely to need ten times their average salary to purchase a house unless action is taken, new research has warned.
Growing demand for housing is increasingly pricing first-time buyers out of the market, a report from the newly-established National Housing and Planning Advice Unit (NHPAU) states.
The organisation, set up by the government to improve the availability of affordable homes, said many people would struggle to get a foot on the first rung of the property ladder in the future if the number of new houses being built does not rise.
Despite a planned rise in the number of new homes to be built over the next decade demand is expected to continue outstripping supply, the NHPAU warned.
Around 190,000 new properties are set to be built each year under regional plans, but household numbers are expected to annually increase by 223,000 until 2030.
The shortage of housing is predicted to cause a further rise in property prices, with the average house price set to climb to ten times the average salary by 2026.
Average house prices were already worth seven times average annual earnings in 2006, the NHPAU said.
Prospective property buyers are also doubtful about their ability to afford to enter the housing market.
A survey of over 2,700 adults in England found that 35 per cent of non-property owners thought they would never be in a position to buy their own home, while a further 18 per cent thought it would take five years or more before they would be able to do so.
Commenting on the results of the survey NHPAU chair Stephen Nickell said: "First-time buyers have seen a big rise in the deposit needed to buy a home and the amount of their income spent on mortgages.
"Demand for housing is growing and unless action is taken, pressure on the market will only get worse," added the former member of the Bank of England's monetary policy committee (MPC).
Meanwhile existing homeowners and potential buyers are set for some respite today, with analysts predicting that the MPC will choose to keep interest rates on hold at 5.5 per cent.
Halifax said the four interest rate rises implemented by the committee since last summer appeared to be having an effect on the housing market.
The mortgage lender reports that house price inflation is now slowing, with property prices in the UK rising by just 0.3 per cent in May – resulting in a drop in the annual inflation rate from 10.9 per cent to 10.6 per cent.
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