Hands Up Who Wants UK House Prices to Grow 40% in the Coming Decade

The UK housing market is getting an unbelievable amount of coverage, well the amount of coverage isn't unbelievable but the amount of it that is portraying it in a positive light and with a positive future is as unbelievable as it is sickening.

Today the Express reports on a Savills prediction that UK house prices will rise 40% over the next decade. That is absolutely brilliant news for estate agents, for homeowners and for high income earners, but for those at the other end of the scale it is nothing short of terrible. Wages are likely to rise by no more than 10% over the next decade so any price rise more than that simply pushes what was once considered a right of the working man even further out of today's working men and women's reach.

Homes are already unaffordable for many of us. As we pointed out in a recent article the average age of a first time buyer has risen from 29 to 30, and for those buying without help from family and friends from 33 to 36. While that is currently mostly because of the restricted mortgage market, or rather the huge deposits it negates, who really wants a return to the 100% mortgages that caused the crisis? As we point

Unfortunately, as the Express pointed out, that is a modest prediction for what prices could and are even likely to do over the next 10 years.

"The prediction is fairly conservative, equating to just 3.4 per cent per annum. This is at the lower end of our expected range," said Stuart Law who heads up the Assetz outfit.
"We would expect prices to increase by up to six per cent per annum over the next decade. Continued and extreme housing shortages versus high demand give us confidence that growth will continue over the coming 10 years," he explained.

Nicholas Leeming, commercial director of property website Zoopla.co.uk, agreed that a 40 per cent rise would be "modest". 
"Britain is a crowded island with limited land, a growing population and highly restrictive planning laws. Successive governments have failed to meet house-building targets, and there is little sign of any change, whatever the political weather. But homes are likely to become more expensive relative to earnings as supply fails miserably to keep up with demand," he said.

Unfortunately I am in a position to disagree with them. The last crash happened in 1989 and while the major falls (20%) stopped in 1991/2, the market stagnated until 1996 and the decade ended with a contraction of about 15% overall.

Sure, that crash didn't have any rises in between, but the last crash wasn't based on the near complete breakdown of not only the UK banking system but that of the US and most of the world. No one impartial can believe we have seen a real bottom in this crash, their reactions are filled with shock and disbelief at the rise we have seen based on demand fuelled by the government stimulus and low interest rates coupled with the low supply as foreclosures slowed and people chose renting over sales.

We could still have more falls and at best we are looking at stagnation for at least 2 years. That leaves 8 years, and if there is growth of 5% before 2014 I will be very surprised, which will leave the market playing catch-up.

Like this post? Subscribe to our feed by RSS or Email, join our newsletter(s) or leave a comment using the form below.