This is very true, people have been instilled with a fear that if they don't get on the ladder ASAP, prices will rise to such an extent that a house is no longer affordable.
Of course, this situation has been engineered by our corrupt government and banks. Over the years, the planning system has become ever more complex and restrictive, thus creating a supply shortage, therefore helping prices to rise.
Between 1999 & 2009 house prices increased by over 150%, pushing the national average house price to over 7 times the national average wage. Traditionally, this has been in the range of 3.5-4.5 times the average wage.
This has created an intergenerational wealth divide. Many under 35s currently unable to afford to buy a family home, would have been able to do so had they been born 10 years earlier, and been of a working age when house prices were more in line with wages.
The cause of the housing boom was largely as a result of market manipulation and credit deregulation performed by then chancellor, Gordon Brown, in a short sighted attempt to generate economic growth out of thin air. Naturally, people already on the housing ladder benefited from this immensely, because on paper they became very wealthy, and were able to use Mortgage Equity Withdrawal to fund home improvements, new purchases and holidays etc. Unfortunately this was a one-shot method of achieving growth and has resulted in Britain having one of the highest levels of household debt in the developed world.
The housing boom was orchestrated through a number of means. Firstly, light touch regulation of the banking industry, leading to sub-prime mortgage lending, and up to 125% mortgages being available - rather than needing to save for a deposit, you could actually borrow 125% of the value of the property you were purchasing. Secondly, housing costs were removed from inflation indexes. This circumvented the mechanism which ensured that if house prices rose sufficiently enough to distort inflation figures, interest rate rises could be used to arrest abnormal growth.
There were also other factors at play too. These include constricted supply due to increasingly restrictive planning regulations and increased demand due to immigration from EU member states, though it is unlikely that these would have had a significant impact on prices.
There were also changes made (again by Gordon Brown) to tax legistlation with regard to pension schemes and investments . These changes were made despite advice from the treasury (and various economists) not to. This resulted in billions being slashed from pension pots, and many final salary schemes ending. This resulted in people looking for other investment vehicles to fund their retirements. Buy-to-let was seen as a very sound investment, both in terms of annual yield and capital appreciation.
We have had, and still do have a housing bubble in this country. It is currently being kept inflated by low interest rates and various other tools. I do not see housing as a worthwhile investment, and will not be making a purchase until the average houseprice:wage ratio returns to more conventional levels.
In 1997, according to the Office of National Statistics, the UK national average wage was £16,666.
According to the Nationwide Building Society the Average House price in 1997 was £55k.
£16,666/£55,000 = 3.3x salary [mortgage]
* The Average First Timer Buyer mortgage in 1997 was just £41.5k [CouncilMortgageLenders]
By 2007, at the peak of the boom [according to the Office of National Statistics] the national average wage had risen to £23.5k
The Average House Price in 2007 was £185k. [According to the Nationwide, however, the CML, and Halifax have it higher. And there are countless examples of 300% increases over that same period. 1997-2007]
£185,000/£23.5k = 7.8x salary [mortgage]
The Average house price would need to fall by around 60% in value, from its peak 2007 valuation, to return to historically acceptable inflationary affordability of 3 – 3.5x salary
[Over two thirds of the UK earn less than average wage. In 2008 an ONS survey showed that over 6 million people earn £10k per annum or less. These included Hairdressers and Cleaners.]
A debt transfer has taken place then. [Polite language for THEFT.]
