housing

by Thomas Hale

Fears of an incipient housing bubble in London – and concerns about the UK property sector in general – are soaring as quickly as the prices themselves. But not all bubbles are created equal – especially when it comes to first-time buyers.

How might rising house prices affect first-time buyers? The graph below shows the average UK house price compared to how much of the average take-home pay first-time buyers spend on repayments.

The most striking thing about the graph is the way price correlates so strongly to the stretched nature of first-time buyer households until mid-2009, at which point the two lines start to move in opposite directions. Prices have begun to go up again, but first-time buyers have become consistently less stretched across the UK. Read more

Kate Allen

By Kate Allen, Callum Locke and Martin Stabe

House prices in the UK are a perennial topic of interest. But different indices measure house prices in different ways, causing confusion among home-owners, who can’t be sure whether their house price is going up or down.

This has become particularly noticeable in recent years as the indices readings have diverged.

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Ever feel like you are slipping behind in the rat race? Well, Londoners now face competition from their homes as well. The average house in the capital is now earning as much as its occupants.

As we noted noted last week, London house prices are rising far faster than in the rest of the UK, up 9.7 per cent over the 12 months to July on ONS figures.

With the average London house costing £438,000, the capital gain was worth £38,729. By comparison, the average London household had a post-tax income of £38,688 in 2011, the last year for which the ONS has statistics.

We appreciate that the comparison of an average apple to an average pear is useful only to illustrate the size of the bubble gains from market enthusiasm. We’re ignoring capital gains taxes, hefty transaction costs, and the difficulty of extracting that value while still having somewhere to live.

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Kate Allen

The number of working-age households in the UK has fallen for the first time since data collection began nearly 20 years ago, according to new figures from the Office for National Statistics.

Household growth has been fairly steady over the past two decades, with the overall population continuing to grow, and this is the first time figures* have actually dropped. Pressures such as low real wage growth and rising housing costs have created economic constraints in recent years which could help to explain the dramatic shift.

UK households

In particular, the numbers of single-person and lone parent households have fallen, hinting at housing affordability pressures. The number of couples with dependent children (under 18s) rose year-on-year, suggesting that families may be staying together rather than separating. Read more

Kate Allen

Money doesn’t grow on trees, right? That’s what UK chancellor George Osborne will be sighing as he prepares for tomorrow’s annual Budget, which is expected to be stringent. But actually, some British policy-watchers think they’ve found a way to magic more money out of thin air.

It comes down to the hoary old question of the public finances. Specifically, Britain’s main measure is public sector net debt, which doesn’t match international measures such as those set out in the Maastricht Treaty: “The Maastricht debt is limited to general government whereas in the public sector finances the principal debt measure is that for the public sector,” explains the ONS.

The key difference relates to a set of organisations called “public sector trading bodies“. These are basically organisations with their own ringfenced cashflows, spending plans and budgets. The Export Credits Guarantee Department is one. So are local authority housing departments.

“Internationally the focus is on general government measures of debt and borrowing – not including the borrowing and expenditure of public sector trading bodies,” says Steve Wilcox, a professor at the University of York who’s been on a crusade to publicise this for several years. Read more

Kate Allen

The number of housing benefit claimants is rising, and thus so is the cost to the Treasury, data from the Department for Work and Pensions shows. The number of people claiming housing benefit has increased by a startling 780,000 since the beginning of 2009 to 5 million.

There are a couple of small rays of light for the government.

Firstly, the rate of increase in claimants has slowed since the general election in May 2010.

Number of housing benefit claimants Read more