The first rung on the property ladder just got even further out of reach

Boris Johnson is expected to try to address the issue by easing planning rules to encourage developments. Housing may yet cause his government the same kind of headache faced by people trying to buy in an overheated market made that way by his government’s policies, writes James Moore

Out of reach: UK house prices are booming (PA)

Anyone trying to join Boris Johnson’s property-owning democracy right now has their work cut out for them. 

The latest Halifax house price index showed that the seasonally adjusted average price for a UK home in April surged to £258,204, a new record, and the second month on the trot in which one has been set. 

That figure represents a 1.4 per cent rise over March, and a stunning 8.2 per cent increase when compared with the same month last year.

The trouble is that while the housing market has been burning rubber, the national pay packet has been stuck in a traffic jam. 

When the Bank of England held interest rates last week, it noted that employers are freezing pay less than they were at the low point of the pandemic. But rises are still forecast to be modest indeed, ranging between 1.5 and 2 per cent for most people working in the private sector. A freeze has, meanwhile, been imposed on many of their public sector peers.

The net result is that buying a home is becoming progressively less affordable. 

Halifax’s figures show that the average first-time buyer is now putting down a deposit of nearly £60,000, while borrowing just over £200,000. 

The house price/earnings ratio confronting the typical first-time buyer, based on the national average wage of £33,439, stands at 7.8 to 1 (note that those figures are not seasonally adjusted).

It all adds up to the mother of all headaches for those trying to get their feet on the property ladder. 

Too few new properties are coming on to the market to satisfy demand – a situation that has, in part, been fuelled by government policy.

It bears repeating that the chancellor, Rishi Sunak, poured a tanker full of fuel on to an overheating market and then chucked in a match when he ponied up taxpayer’s money to offer banks guarantees for offering 95 per cent mortgages. Meanwhile, the tapered end of the stamp duty holiday served to turn up the temperature.

Add that to the gradual ending of pandemic-related restrictions, hopes for an economic rebound, and panicky buyers jumping in (maybe over their heads) for fear of missing out if prices get even higher down the line, and the current state of the market is hardly surprising.

The government is expected to take steps in the Queen’s Speech tomorrow to try to address the issue of limited supply. Plans to reform planning regulations in an attempt to get more homes built will be one of the centrepieces of its legislative programme. Other measures could include a “use it or lose it” demand to encourage the big builders to stop sitting on land banks, and discount schemes for key workers and the forces. 

Builders will be able to construct new estates with ease in areas designated for growth, many of which are expected to be in the north, where the government hopes to entrench the increase in Tory support. There is ample data to suggest that homeowners favour the Conservatives, while renters lean towards Labour.

However, it would be no surprise to see a lot of places earmarked for “preservation” in southern constituencies, where a very different type of Tory voter has in the past screamed bloody murder at the prospect of new housing estates on the outskirts of their leafy towns and suburbs. 

Of late, demand has proved strong in the north. Wales has had the hottest housing market of the last 12 months, although the northwest and Yorkshire/Humberside have also been fortified with extra spice. The northeast less so, while London’s has been in cold storage. 

Previous government promises to ramp up supply have turned to ashes. Maybe the latest package of measures will work the miracle. But they will take time to have an impact on the market, and controversy is all but certain to follow.

The UK housing headache seems destined to spread beyond those stuck on short-term tenancies, unable to secure even government subsidised mortgages as the market surges out of their reach.

They could be forgiven for feeling a certain amount of schadenfreude.