Average UK house price to hit £780,000 by 2040, says leading think tank
By Camilla Canocchi for www.Thisismoney.co.uk
The price of the average home will more than triple to a staggering £780,000 by 2040, according to a leading think tank.
The Policy Exchange calculated that the average first-time buyer, currently aged 32, will be paying nearly £800,000 for a home in 26 years time, based on the current average house price of £244,000.
The think tank used a complex Government formula taking into account price inflation and housing forecasts to produce the figure.
Prediction: The Policy Exchange said the average house will cost £780,000 in 26 years time
It said the fact that UK house prices were on average ten times higher than earnings was ‘socially divisive and economically dangerous’ and called for more, good quality homes to be built in so-called ‘garden cities’ across the country.
Chris Walker, head of housing and planning at Policy Exchange, told The Telegraph: ‘House prices are on average ten times higher than earnings in Britain. This widens the gap between rich and poor, young and old, north and south. The situation is socially divisive and economically dangerous.
‘Even those who have enjoyed seeing the value of their home increase are now beginning to worry about how their children will be able to afford a home.’
Latest data from Nationwide shows house prices rose by 0.8 per cent in August, marking the 16th consecutive monthly increase in a row, despite predictions that new stricter lending rules could start to cool the market.
Prices were up 11 per cent year-on-year – far ahead of average wage growth, which has been running at less than one per cent in recent months.
The disparity means thousands of households may have seen their home 'earn' more than its inhabitants over the past year – while those yet to buy their first home will have seen that dream move further out of their grasp.
Recent figures from the Land Registry, which are based on actual sales prices, showed house prices soared by 1.7 per cent in England and Wales in July.
'Garden cities' are developments with large amounts of green space built as an expansion to existing towns or cities.
The Government announced in April it was to build up to three garden cities, each with more than 15,000 homes, to help deal with Britain's housing shortage.
This week, planner David Rudlin was awarded the Wolfson Prize for his idea to double the size of existing towns and cities by building more than 80,000 homes in garden cities in the green belt.
The Policy Exchange said it backed the Wolfson Prize, which was run by Lord Wolfson of Apsley, the chief executive of clothing retailer Next.