Wages must double to keep up with house prices

Most people earning average wages in the South West would need to more than double their annual salary just to keep up with out of control house prices, new research by homelessness charity Shelter shows.

In the study, released today, the charity looked at wage and house price inflation since 1997 in every area of the region. This was then used to calculate what average annual earnings would be if they had risen at the same rate as house prices.

The charity argues that as the disparity between house prices and wages is keeping a generation of people out of the market.

“When you’d need to more than double your salary just to keep up with rising house prices, it is no surprise that the dream of a home of their own is slipping further out of reach for a generation.” Said Shelter’s Chief Executive, Campbell Robb.

He continued: “Politicians need to start meeting people halfway by committing to bold solutions that will get more affordable homes built. Otherwise future generations will find themselves priced out of a stable home, however hard they work or save.”

Regionally Cheltenham had the largest disparity with people earning an average annual salary would need to see their pay increase by over £41,000 to be in line with the rise in house prices.

In Bristol people on average wages would need an extra £32,000 each year to keep up with house price inflation, and in Swindon over £26,000 extra would be needed.

Averages earners in Sedgemoor would need the smallest pay rise, but here almost £16,000 would still need to be added onto the average salary to put it in line with the rise in house prices.

The impact of the housing shortage has been widespread, with the latest Census showing a 7% drop in the proportion of home owners in the South West.

Meanwhile across the country the gap between wages and house prices continues to grow. In the late nineties the average house cost five times the average salary, but by 2012 it had jumped to a massive ten times.

The charity argues that this leaves thousands of people priced out of the property market and with no choice but to live in unstable private rented homes, or remain in their childhood bedroom well into adulthood.

The charity claims that if house prices are left to rise further this will not only price out future generations hoping for a stable home and will makes things harder for the thousands of families struggling to keep up with their high housing costs each month.

Shelter has called on the government to address the shortage of affordable homes as a matter of urgency, and give young people and families who work hard and save money each month the chance of a stable home.

Campbell Robb, Shelter’s Chief Executive, said: “The reality is that successive governments have failed to build the affordable homes that this country needs, and as a result our housing shortage has reached crisis point.

“Despite the fanfare surrounding Help to Buy, pumping money into mortgage guarantee schemes is not the solution.

“This further inflates prices by increasing demand for an already limited number of homes, and will only make things worse for the next generation of first time buyers. The only solution is to build more affordable homes.”