In real terms, property prices are at their highest level for over 30 years. It’s a fact that excess demand for property pushes up prices. If the cost of borrowing or renting falls, people leave home or leave rented accommodation to borrow money in order to finance the purchase of a property. In nearly all cases they would do this as first time buyers. By doing this, first time buyers feed the housing market and in turn are playing a part in bringing the property market back into balance. However, it’s not that simple because if as we have seen, property prices rise too rapidly, prospective first time buyers could be excluded from the purchase market and forced into the rental market. These are the very individuals who feed the purchase property market. By way of example, the national average price of first time buyer home in 1986 was approximately £30,000The national average price of first time buyer home in 1996 was approximately £40,000. An increase of approximately £10,000 over the 10 year period between 1986 through to 1996. This equates to £10,000 over 10 years = £1,000 per year.The national average price of first time buyer home in 1998 was approximately £50,000. An increase of approximately £10,000 over the 2 year period between 1996 through to 1998. This equates to £10,000 over 2 years = £5,000 per year.The national average price of first time buyer home in 1999 was approximately £60,000. An increase of approximately £10,000 over the 1 year period between 1998 through to 1999. What can I say, an increase of £10,000 over 1 year is significant. The national average price of first time buyer home in 2002 was approximately £60,000. The average price of a home in London in 2002 was £241, 000These increases are in the long term, completely unsustainable when we consider that for most of the 1990’s property prices were between 2½ to 3 times the average income. Today the average property price stands at more than 4½ times the average income. Contrast the significant increases in property prices since 1986 to the number of properties added to the rental market over recent years. In 1998 there were approximately 28,700 mortgages taken out on buy to let properties. Just one year later in 1999, the figure had more than doubled to 58,800 buy to let mortgages. Towards the end of 2003, the number of buy to let mortages had spiralled to 408, 300. This growth has arisen because there is a demand for rental properties. Can anyone see a pattern developing here? ………… prospective first time buyers could be excluded from the purchase market and forced into the rental market. These are the very individuals who feed the purchase property market. Don't just worry about your property for your pension fund, think also about the pension funds with our money invested in commercial property organisations, etc. etc.
Gareth Evans ● 7416d