House prices 'will hit 15 TIMES the average income', leading economists warn

According to a recent article in 'This is Money, house prices will hit 15 times the average income, leading economists warn.  To read this article in full, please visit http://www.thisismoney.co.uk/money/mortgageshome/article-4825858/House-prices-hit-15-TIMES-average-income.html



House prices 'will hit 15 TIMES the average income', leading economists warn

  • Rising numbers will be forced to rent instead of buy, economists argue
  • House prices will continue to rise unless public transport improves commuting options 

Young Britons hoping a house price crash will let them buy a home could see their dreams thwarted, leading economists warn.

David Miles, a former member of the Bank of England's Monetary Policy Committee and now a professor at London's Imperial College, and colleague James Sefton argue in an influential report that house prices could continue to defy gravity. 

The two say home values will carry on rising until the typical property costs 15 times the average income.

Some economists say home values are overinflated and will have to fall at some stage. But Miles believes they can continue rising for several generations, freezing first-timers out of the market.

The figure is already more than five times a first-time buyer's average income, according to Nationwide. London buyers have to find ten times their salary.

David Miles believes home values will carry on rising until the typical property costs 15 times the average income

He says this is due in large part to the fact that public transport has barely improved since the Second World War. This means people cannot commute far to get to work.

He argues that the introduction of the Underground in London and buses there and in other cities allowed their populations to grow in the past without pushing up house prices to unaffordable levels. 

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