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Over the last couple of weeks a number of events have come about which have shed a light on the housing market and, in particular, the difficulty for first time buyers to purchase properties. First was news that the price of houses is rising again across the country having been in a state of stagnation for the last couple of years. For many this was taken as a sign that the recession was finally over and that the economy was returning back to normal. Then a report by Oxfam appeared that the five richest families in the UK have a higher combined wealth than the poorest 20 per cent of the nation, with the most of their wealth held in property. Finally the Chancellor of the Exchequer, George Osborne, announced that he would extend the help-to-buy scheme, whilst also promising the construction of a new 'garden city' in Ebbsfleet with up to 200,000 new homes.
The effect of the help-to-buy scheme has been controversial. The biggest winners have been construction companies and current home-owners. The reduction in the cost of mortgages has pushed up the demand for housing, especially in London. Unfortunately there hasn't been a big enough increase in supply to match this change, so house prices have increased and there hasn't been a move in the construction of new houses to make up for this.
Although the construction sector has recovered and is in a healthy state at the moment, it is at the expense of an increasingly segregated housing market. The reason why these families have so much wealth is precisely because of the land that they own. The richest family in the UK, headed by the Duke of Westminster, owns 77 hectares of Belgravia and Mayfair, possibly the most expensive area of London, as well as large tracts of Cheshire.
For many young people now, owning their own house is merely a dream. In London, where many students and young people hope to work in the future, the average house price for a small 2 to 3-bed house is £475,940. This effectively means that there are only 2 ways to get a house. Either inherit a large amount of money or 'win the lottery' by landing a very highly paying job. Both of which are not guaranteed to net one a house. Inheritance tax stands at 40 per cent of any sum above £325,000, so a person would need to inherit about £600,000 to afford a house in London. A person earning £100,000 would only receive about £60,000 after tax. With the high cost of living in London, even a seemingly high income does not even guarantee a home.
This trend of people being priced out of the housing market has, to a lesser extent, been repeated across the country. An increasing convergence to the big cities by both firms and people is one of the lead causes of these inflated house prices and it is a trend which is only likely to increase. The options left are few. The announcement by the Chancellor of a new commuter town only fifteen minutes, by train, away from the centre of London represents some hope.
This, though, is the future for many people working in London. Unable to afford houses in the city, people are forced to make the commuter towns their home. The Chancellor's project is a step in the right direction. The help to buy scheme has indeed aided many first time buyers in buying houses but more needs to be done to encourage construction and, so, lower house prices.
One hope is that as technology advances it will be easier for people to work from home. So perhaps, in the near future, people could work in London whilst enjoying the peace of living in the countryside. But, until this happens, Britain's might have to become a lot more continental in nature and forget the adage that 'an Englishman's home is his castle' and be resigned to renting.