Affordability of housing in the UK reflects the ability to rent or buy property. Housing tenure in the UK has the following main types: Owner-occupied; Private Rented Sector (PRS); and Social Rented Sector (SRS). The affordability of housing in the UK varies widely on a regional basis - house prices and rents will differ as a result of market factors such as the state of the local economy, transport links and the supply of housing. For owner-occupied property key determinants of affordability are: house prices; income; interest rates; and purchase costs. For rented property, PRS rents will largely be a reflection of house prices, while SRS rents are set by Local Authorities, Housing Associations or similar on the basis of what lower income groups can afford.
Video Affordability of housing in the United Kingdom
House prices
Land Registry figures for England and Wales show that house prices tripled in the 20 years between 1995 and 2015. Growth was almost continuous during the period, save for a two-year period of decline around 2008 as a result of the banking crisis.
House price averages compared to average salary
The gap between average income and average house prices has changed between 1985 and 2015 from twice an average salary to up to six times average income, in the least expensive areas of England and Wales. Median house prices in London the median house now cost up to 12 times the median London salary.{{fact|date=J ihhilhgyghf. Okkk19,000 and the median house price was £83,000, 4.4 times median income. By 2012-13, the median income in London had increased to £24,600 and the median London house price had increased to £300,000, 12.2 times median income
In 1995 the Bank Base Rate was 6%, in March 2009 it stood at 0.5% until August 2016 when it was further reduced to 0.25%.
Impact of planning restrictions on house prices
Some economists and pressure groups such as Shelter argue that planning restrictions are a factor behind the rise in prices as up to 70% of the cost of building new houses is the purchase of the land (up from 25% in the late 1950s).
An analysis by the LSE and the CPB Netherlands Bureau for Economic Policy Analysis found that house prices in England would have been 35% cheaper without regulatory constraints. A report by the Adam Smith Institute found that by using 4% of London's green belt, one million homes could be built within 10 minutes walk of a railway station.
The Economist has criticised green belt policy, saying that unless more houses are built through reforming planning laws and releasing green belt land, then housing space will need to be rationed out. It noted that if general inflation had risen as fast as housing prices had since 1971, a chicken would cost £51; and that Britain is "building less homes today than at any point since the 1920s". According to the independent Institute of Economic Affairs, there is "overwhelming empirical evidence that planning restrictions have a substantial impact on housing costs" and are the main reason why housing was two and a half times more expensive in 2011 than it was in 1975.
The Campaign to Protect Rural England argued that "Green Belt land is important for our wider environment, providing us with the trees and the undeveloped land which reduce the effect of the heat generated by big cities. Instead of reducing this green space, we should be using it to its best effect. We know from our research that three quarters (79%) of the population would like to see more trees planted and more food grown in the areas around towns and cities."
Valuation of land and impact on house prices
Property companies state that land values follow house prices and that a developer assesses what new build house price is achievable in any particular location with reference to prices and sales rates in the second hand market and on nearby comparable new build sites. At a basic level (assuming no affordable housing, S106 or CIL), they then multiply that new build house price by the number of homes to be built on the land and to arrive at the gross development value (GDV) of the site. The underlying value of the land is then the GDV less the cost of development and less an allowance for profit.
Maps Affordability of housing in the United Kingdom
Property costs
The principal taxes imposed by central government are Stamp Duty and Value Added Tax (VAT). Other costs which are associated with the buying and selling of property are estate agent fees, conveyancing and survey fees, mortgage arrangement fees (where applicable), and removal costs.
Stamp Duty Land Tax
Stamp Duty Land Tax is payable by the buyer of a property as a percentage of the purchase price.
From December 2014, Stamp Duty was changed to a graduated system which eliminates the jumps in stamp duty at the threshold values. For instance a property of £600,000 under the old system would pay 4% tax of the whole asking price i.e. £24,000. Under the new system no tax is paid on the first £125,000, the next £125-250,000 is charged at 2% i.e. £2500 plus the portion (£350,000) in the £250,000-£925,000 tax band at 5% i.e. £17,500. This gives a total tax of £20,000. This change was said to be beneficial to 98% of property purchases but caused a collapse in sales at the upper end of the market.
Estate Agent fees
In 2011, Which? magazine found the national average estate agents fees to be 1.8%.
Survey
There are four main types of survey: a valuation survey, a condition report, a homebuyer report and a full structural survey.
Legal fees
Conveyancing fees vary according to the value of the property and the service provided.
Mortgage arrangement fees
In April 2013, The Daily Telegraph reported that research by Moneyfacts showed the average mortgage arrangement fee to be £1522.
Rented homes
The English Housing Survey Bulletin 13 states that in 2013/14 there were 4.4 million households in the private rented sector and 3.9 million households in the social rented sector, of whom 2.3 million households (10%) were renting from a housing association and 1.6 million (7%) were renting from a local authority. Private renters had the highest weekly housing costs, paying on average £176 per week in rent. Mortgagors paid an average of £153 per week in mortgage payments while mean weekly rents in the social housing sector were £98 for housing association tenants and £89 for local authority tenants. When considering the gross weekly income, including benefits, of all household members, the proportion of income spent on housing costs was 18% for mortgagors, 29% for social renters, and 34% for private renters.
See also
- Homelessness in the United Kingdom
- Gazumping
- Green belt (United Kingdom)
- Housing in the United Kingdom
- Great Recession
- Help to Buy
- List of entities involved in 2007-2008 financial crises
- Real estate economics
- Subprime mortgage crisis
References
Source of article : Wikipedia
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