Property prices are now increasing at such a speed that houses are earning more a year than the people who live in them. Research carried out by the MailOnline has revealed that across the country increasing house prices are outstripping most annual salaries.
Chancellor George Osborne has now taken action to decrease the amount that buyers can borrow, in an attempt to limit loans in relation to borrower’s earnings. This has now made people fear that they will never be able to get on the property ladder.
The average price of a property has risen approximately 7% to £172,069 over the past year, which is an increase of £10,809 – around half the total annual homeowner’s earnings in 2013.
In Central London and the surrounding areas, house prices have been on the up significantly, with some properties worth tens of thousands more than this time last year. One property in Westminster increased by £160,810.
The new rules being put in place by Mr Osborne mean that the Bank of England can now limit the amount of money that lenders can borrow. This means that in the areas where property prices are sky rocketing, if wages do not rise accordingly, buyers will struggle to get on the property ladder.
On the south coast of England, the average property increased by £28,702, but the average earnings stood still at just £22,740. In Wales there were two places that saw their houses earn more than the people living there did.
The figures that have been taken for average earnings are before tax, so really the gap between house price increases and wages is even bigger than it initially seems. These figures have stoked the fear that Britain could be approaching a housing bubble.
Although the Help to Buy scheme, introduced by the government last year, has allowed more young people than ever to get their first house, due to the fact that the supply of homes has remained low, there is now a shortage of reasonably priced housing.
Emma Reynolds, Labour’s shadow housing minister said of the situation:
“To tackle this crisis we need to build many more homes which is why Labour have repeatedly called for action on housing supply but this government has failed to act. Under David Cameron the number of homes built has fallen to the lowest level in peacetime since the 1920s.”
Under the new Mortgage Market Review rules, those applying for mortgages will now face a much harder application process, with interviews that could take up to three hours. Applicants will have to divulge information about their lifestyle, spending habits and even future plans for their family.
Property prices have risen by 17% across London, and John Candia, co-founder of iProperty said:
'It is extraordinary to think that some London homeowners are on course to earn more from their properties in one year than the Prime Minister makes for running the country.'
There have, however, been signs that the market may now be cooling down a bit, but we will have to wait and see whether prices will continue to drop and hopefully reassure the country that we are not heading for a housing bubble.