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House prices rise at twice the wage rate

Major sections of British society are being priced out of the housing market, because property prices across the country are climbing twice as quickly as the average wage rate.

The research was carried out by the Cambridge Centre of Housing, Planning and Research, and was commissioned by the National Housing Federation and Chartered Institute of Housing Foundation as part of the 'Our Homes, Our Future' campaign. It found that the cost of the average home in Britain increased by 135 per cent in real terms in the last 30 years, while salaries rose by just 60 per cent.

It has also testified that that single people are the most likely group to be priced out of the market over the next 15 years. According to projections, more than two million people are likely to live alone by 2016, with most of them being unmarried and in their 30's. Many of these live in the south east of England where housing is most expensive and rising rapidly, and fears are mounting that they will be unable to keep pace with the price rises.

Little wonder then, that Mayor Livingstone is arduously campaigning for affordable housing in London. During the period of the study, the average price of a London home rose to £177,182 from £14,447 without accounting for inflation. Since coming to power, Mr Livingstone has been advocating serious increases in the level of affordable housing in the capital, particularly for key public sector workers.

The research clearly advocates his position, showing that house prices are denying nurses, teachers and other low-income workers the chance of buying their own home. Despite a slight weighting due to the increased cost of housing in the capital, London-based staff nurses and newly-qualified teachers earn basic salaries of less than £20,000. This is approximately a third of what is required by most lenders in order to be able to afford the average London home.

In a bid to help the situation, Ministers are considering mortgage subsidies for teachers, nurses and other low-income groups. The proposals look set to involve a top-up mortgage on homes at the lower end of the market costing £125,000 or less. Homebuyers in these social groups would be entitled to an interest free loan of up to £50,000, to accompany a mortgage of £75,000 from a commercial lender.