Whilst wages have not seen much of an increase of late, property prices have continued to rise. This creates a problem that we have seen for many years, but what is the answer to it?
After the ‘right-to-buy’ scheme was introduced in the 1980s, much of the social housing stock available was reduced. We are now seeing much of the benefit budget of the government being used to house people who should have fallen into the social housing category. Whilst the ‘right-to-buy’ scheme did help to kick-start a home ownership transformation, it created a shortfall in social housing that has never been restored.
This lack of social housing has driven many towards private rentals, which in turn, has impacted on the increase in house prices. First-time buyers are amongst the swathes of people who look to private rentals as an option due to astronomical deposits and unaffordable mortgage payments. This has provided investors with a safe bet for their money, and the competition for housing assets has caused house prices to grow.
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When you are looking to buy a property, but much of what is available seems out of reach, you are encouraged to lower your expectations. For many, this means looking for something smaller than they had planned, but now small really does mean small. Many major cities around the world now offer much smaller than average properties which are then more affordable. These ‘micro-flats’ are growing in popularity as it gives many a chance to get on the housing ladder who would not otherwise have been able to. What toll this takes on the standard of living in these properties remains to be seen.
In the UK, there are minimum housing dimensions in place that developers have to adhere to. In order for a ‘micro-flat’ revolution to take place, local authorities will be required to give permission for these properties to be built in the first place.
Whilst there may be a shortage of property driving up prices, the solution is not as simple as just ordering new houses to be built. The UK house-building market is in dire need of its own revolution thanks to a distinct lack of skills currently available in the construction industry. With fewer apprenticeships and training incentives, many have bypassed the construction world as a career path, leaving a skills shortage when it comes to providing new homes.
Whilst there are moves to stabilise the property market through social housing and ‘micro-flats’, there is still more that can be done to make buying a home at a sensible price a realistic option. By regaining control of house prices it will be easier to bring it in line with wages, making mortgages more affordable.
An improvement in the social housing situation and more help for first-time buyers would reduce the need for private rentals, and also the control that property investors hold over the market. However, without the fabled ‘magic money tree’ it is unlikely that any of this will come to fruition in the near future.