Osborne must act to freeze house prices to hit his first-time buyer target

·       The Conservatives have pledged to double the number of first-time buyers

·       House prices will need to stop rising for this target to be met, analysis shows

The government will fail on its election promise to double the number of first-time buyers if it doesn’t act to put a brake on house prices, PricedOut says today.

During the General Election, George Osborne pledged to double the number of first-buyers[i] from its current level of 300,000. But the higher house prices rise, the fewer people will be able to afford to buy their first home.

Zero house price inflation, combined with forecast wage growth of 19% between 2015 and 2019, would bring home ownership back within reach of 300,000 couples currently renting. PricedOut is therefore calling on the Chancellor to set a target of zero house price inflation in his Autumn Statement.

PricedOut has calculated that a household would require an income of £54,000 to afford the average first home of £216,000, but HMRC figures show that 72% of dual income households earn less than this - the equivalent of 3.89million private renters[ii].

But if house prices stopped rising[iii] and earnings grew at the rate forecasted by the Office for Budget Responsibility, 12% more households would be earning £54,000 or more, thus becoming ‘priced into’ home ownership.

While a target of zero house price inflation would in itself have a useful effect on market sentiment, these further reforms would be needed to bring house price inflation to a halt:

Building 300,000 homes a year focussed in the most unaffordable areas;

Clamping down on buy-to-let by completely withdrawing tax relief on buy-to-let mortgage interest;

Reforming property taxation by enabling councils to revalue and change the banding of council tax to reflect contemporary house prices and increasing capital gains tax to deter the use of housing as a speculative investment.

Restraining mortgage lending including an end to Help To Buy mortgage guarantees;

Duncan Stott, Director of PricedOut, said:

“The Conservatives like to say they are ‘the party of home ownership’, but the level of home ownership declined throughout their first five years in power. If George Osborne genuinely wants to meet the aspirations of first-time buyers, he must take immediate action to bring an end to the UK’s addiction to rising house prices.

“No-one seriously believes that a few little schemes and initiatives will fix the housing crisis. The only way that the Conservatives will fulfil their promise to double the number of first-time buyers is with a target of zero house price inflation. Major reforms to the way the housing market operates will be needed to meet this target.”

Ends

Notes to editors

PricedOut (www.pricedout.org.uk) represents the millions of people who would like to buy their own home but cannot buy because of high house prices and high rents. The campaign is independent of any political party and supports initiatives to increase the supply of good quality housing in the priciest areas of the UK.

PricedOut uses the HMRC’s percentile breakdown of UK taxpayer incomes, the English Housing Survey’s income profile of private renters and the Office for National Statistics’ latest House Price Index to estimate how many people can afford the average first home, based on the assumption that a home is affordable if it is no more than 4 times household income.  

Date

Average first-time buyer house price

Income percentile that cannot afford to buy

Joint income

Number of private tenants that cannot afford to buy

Total priced out

% priced out

May 2010

£155,000

49

£38,600

2,501,550

2.50m

54%

Sep 2015[iv]

£216,000

62

£53,102

3,886,835

3.89m

72%

2019[v]

£216,000

52

£45,012

3,265,020

3.27m

60%

 

The full methodology can be found in PricedOut’s original PricedOut Index report: http://d3n8a8pro7vhmx.cloudfront.net/pricedout/pages/44/attachments/original/1392820666/PricedOut_Index_report_190214.pdf?1392820666

Grant Shapps, the Conservatives’ original Housing Minister, called for “a period of house price stability” in October 2010. First-time buyer house prices have since increased by £63,000. https://www.gov.uk/government/news/grant-shapps-urges-house-price-stability-to-help-wannabe-homeowners



[i] The Conservative Party Manifesto 2015

[ii] Data availability is limited to private rented sector tenants who pay income tax

[iii] Nominal terms

[iv] Latest available data

[v] Figure if house prices were to freeze throughout 2015 to 2019


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  • commented 2015-11-23 19:21:36 +0000
    What about intrest rates? Surely if the Chancelor he a word with his chum in Threadneedle St he could pursuade him to raise them and reign in record levels of borrowing and debt. This in turn would slow or even stop house price inflation. Wouldn’t cost the government anything too.