WITH each new housing headline, the hearts of young would-be homeowners across the land must sink a little. The latest gloomy prediction emerging from economists this week has the next generation of buyers staring at property price tags 10 times the size of their salary by 2026. Conditions for those trying to get a foot on the housing ladder are bad enough at present. News that they are to worsen may cause some to give up the aspiration of home-ownership altogether. Which, according to Professor Stephen Nickell of the newly- formed National Housing and Planning Advice Unit, is not good news at all... for any of us. In a foreword to a report released this week, the former Bank of England MPC member warned: "Deprivation will increase and the situation will worsen in already deprived areas. "The economy suffers from the consequent impediments to labour mobility and an increasing quantity of taxpayers’ money is required to deal with the social problems generated both by increasing deprivation and the inability of numerous key workers to find somewhere to live in the area where they work." Such words may chill the blood, but they shouldn’t be dismissed as the Prof has a point. Unless Bob the Builder and his friends at local and central government seriously increase the number of homes being built, an increasing number of people are going to have to "readjust" their home-ownership aspirations or up sticks to find somewhere cheaper to live. Statistics show that in the last financial year, work commenced on 173,369 new homes in England and Wales. Sounds impressive, that is until you realise that latest estimates put the number of new households formed every year for the next two decades at 223,000. That is a shortfall of almost 50,000 in the last year alone. If things continue, by 2026 there will be a further million families shut out of the property market. It is a problem that the Government is fully aware of. Soon-to-be prime minister Gordon Brown acknowledged the "housing problem that we have got to deal with" in his first interviews following Tony Blair’s announced departure. AS SUCH, he declared a determination to raise home-building to 200,000 annually, and the creation of a number of new "eco-towns" to satisfy environmental and housing demands. Even if such targets are met, future house hunters could face heartache. The Chancellor’s determination to get construction levels up to the 200,000 mark would still leave up to half a million newly formed families out in the cold by 2026. Basic economics should tell you that with such supply and demand discrepancy, house prices will continue to rise – perhaps reaching the 10 times salary predicted by the National Housing and Planning Advice Unit. So where does this leave today’s struggling first-time buyers? The figures do not make comfortable reading. Young homebuyers are now borrowing an average 3.3 times their annual income to get on the property ladder. A decade ago they would be looking at a loan of around two- and-a-half times their salary. A generation ago, their parent’s mortgage would be the equivalent of less than two years earnings. Deposits over the last 10 years have remained largely stable, representing around 10% of the property value, according to the Council of Mortgage Lenders (CML). But with the average property price trebling over that period so has the up-front deposits that buyers have had to stump up – a further burden on those struggling to attain homeownership. Despite the odds being stacked against them, the number of first-time buyers has remained resilient over the last few years. "There has been no decline in first-time buyer activity since 2004," the CML noted in a paper that went out this week. How so? Well parents have played a huge role in bankrolling their offspring as they make the transition from tenant to owner. Almost half of maiden homebuyers under the age of 30 receive substantial financial help from relatives to raise a deposit, figures show. At the same time innovation by mortgage firms has left the door open to many who would otherwise be left out in the cold. Larger loans and longer repayment periods have encouraged buyers onto the market. Meanwhile, new products such as group mortgages, loans guaranteed by parents and shared equity schemes have been pushed by lenders in a bid to attract first-time buyers. Despite the best efforts of lenders, parents and young buyers themselves, there remains an air of resignation among a sizeable section of those not currently on the housing ladder. Figures released this week showed that more than a third of non-homeowners think they will never be in a position to buy, with a further one in five stating that it will take them at least another five years. David Hollingworth, of mortgage broker London & Country, said he had noticed a trend towards more people renting for longer. He said: "People are moving around more for work and staying single for longer. Some people like the flexibility of renting. But affordability issues have meant the harsh reality is some have to continue renting longer than they would have thought." HELEN ADAMS, managing director of FirstRungNow.com – an online advice centre for first- time buyers – believes that looking forward, many young people will have to readjust their expectation of home ownership as prices rise further and affordability conditions worsen. "The country is going to have to get used to becoming more of a rent-based country," she said. Echoing Professor Nickell’s concerns, she added that within 30 years we could be faced with a country divided between the property haves and the property have-nots.
£3m for a one-bedroom flat - but it is in a nice area
A ONE-BEDROOM flat in London has been put on the market at close to £3m in the latest indication of the capital’s booming property prices.
Situated in the highly sought-after locale of Belgravia’s Eaton Place, the swanky pad comes with a price tag of £2,750,000 with the cost set to rise by a further £300,000 if the seller can be persuaded to extend the lease from the current 43 years. If it does go for the maximum, it would be the second £3m one-bedroom flat to be sold in recent months, according to estate agents Savills, following the sale of an equally- expensive flat in nearby Cadogan Square. The latest flat to attain £3m status is far from poky, despite its solitary bedroom. Its 1,200-plus square feet is more befitting of a roomy three or four bedroom house. And anyone willing to part with the required cash will have the privilege of rubbing shoulders with the rich and famous as they pop down to the local shops. The area is renowned as a haunt for billionaire emigrés, high-flying city types and the odd celebrity with money to burn. News of the latest super- expensive flat confirms London’s place at the top of the most desirable areas for the super-rich to set up home. A lack of supply has pushed the price of property in the capital skywards in recent years and is showing little signs of abating. Recent data shows that annual house price inflation in the capital is hovering around the 15% mark. At the top end of the market, hikes are even more striking. A shortage of available property has mixed with an influx of the ultra-wealthy for whom money is no problem – propelling prices to levels previously unheard of. Ian Springett, chief executive of Primelocation.com, said: "There is a complete imbalance of supply and demand and clearly there is money around for people who want to own property come what may." Commenting on the latest £3m one-bedroom flat, Alex Stroud from estate agent Savills, said: "This really is the most fabulous one- bedroom flat on the first floor of a white stucco- fronted building in Belgravia. "The proportions are wonderful – with elegant and well-proportioned rooms with high ceilings. "Personally, I would rather buy a wonderful one- bedroom flat than a mediocre two-bedroom flat of the same size. After all, who wants guests to stay?" | 
