By Legal Futures Associate Search Acumen
“Rate rise adds to ‘fantasy economics’ underpinning the property market where the average house will soon cost more than ten people’s salaries”
Analysis by Search Acumen of official data shows in the 14 years since the Bank of England base rate last exceeded 2%, the average UK house-price-to-income ratio has increased from 7.7x in November 2008 to 9.8x in July 2022. Historic data from Halifax indicates the house price-earnings ratio was lower than 3.0 from 1951-71.
Andy Sommerville, Director at Search Acumen, the property data and insight provider, comments:
“Rate rises have become one of the most predictable events of 2022, but the implications for property buyers are huge when we’re fast approaching the point where the average UK home costs more than ten people’s salaries. The ‘fantasy economics’ underpinning the housing market are all too real for would-be homeowners, whose ability to save is hampered by rising rents and soaring inflation.
“Low interest rates have been the balm that has soothed the burning affordability crisis for much of the last decade. This latest rise risks leaving first-time buyers stranded at the foot of the property ladder with more financial pressures than ever to weigh them down.
“More than ever, Government needs to get to grips with the structural shortages that are holding back the market if it wants to relive the post-war boom that drove housebuilding to new heights. Cheap credit and inflationary incentives can’t keep the fires burning when the market needs planning reform and digital transformation to make it fit for purpose.”