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15 | 02 | 11

A lost generation and a lost decade?

Posted by: katalysis

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Today Housing Minister Grant Shapps invited Lenders to a “summit” to discuss the plight of First Time Buyers. In advance the CML put out an article pointing out that it is not only FTBs who are suffering in the current market. Present sales levels mean the lowest turn over of homes relative to the housing stock for over 40 years. We have said before that the key to restoring a healthy market is a return to affordability for FTBs. In the past this has been achieved by the ratio of house prices to income reverting to its long run average (often at the expense of inflation). We all know that price inflation is becoming a headache but whereas previous generations saw the cost of servicing debt eroded by wage inflation the current crop of would be FTBs don’t have this as a leg up onto the housing ladder. Absent a marked short-term correction in house prices (which seems unlikely) it would appear as though we are in for a long haul back to normality. In fact the CML predicts that “it may take several years” for sales volumes to revert to their historical average.
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