New research by Nottingham Trent University shows that new-build homes, widely thought to help stem an unsustainable growth of house prices, may actually be making the property market more unaffordable.
The study found that for every 1% growth in the supply of new homes, mortgage payment to income ratios in the UK worsen by 9%.
Dr Koblyakova, from the School of Architecture, Design and the Built Environment and author of the report, said: “The government thinks that by increasing the supply of new homes, the overall cost of owning a property will come down.
“But this research shows us that the mortgage market behaves differently. When new housing comes on to the market, lenders relax their conditions and lend more money. And when consumers are more able to buy a property for a higher price, the price of property doesn’t come down.
“This is a significant finding and is the opposite of what’s generally expected. It’s important, therefore, that future affordability programmes focus not only on the supply of affordable housing, but also on the supply of housing finance.”
The study – based on a sample of more than 1,700 mortgage holders between 2010 and 2014 – was taken from a range of sources including the Understanding Society Survey, Bank of England data archive, Land Registry data and European Mortgage Federation publications.
According to the Demographia International Housing Affordability Survey (2016), homes in the UK demonstrated a seriously unaffordable rating category last year. The house price to income ratio nationally was 4.6 nationally and 8.5 in Greater London. Affordable housing is graded as 3.0 or less.
“The main issue that property values in the UK go up faster than wages,” added Dr Koblyakova.
“It’s not possible for the government to control house prices. But it is possible for politicians to motivate lenders to offer longer mortgage contracts to reduce the size of monthly mortgage payments.
“By increasing the duration of a mortgage to 30 years, for instance, it’s possible to make owning a property more affordable for those on average incomes.”
The study is set to be presented at the European Network for Housing Research conference, Aberystwyth, Wales, between 7 and 8 April.
I make a good living never miss a payment on anything ever!, I have no debt except a new car! Yet I can only borrow 63 grand( but only as long as i pay off my new car in full!) I want to move house and I cant sell my current home! I own my current house outright! I make 15 grand a year self employed my turnover 30 grand. How on earth would I afford a new build with 63 grand?, even if I traded my current home in! Its Impossible.. The whole banking system is floored and its algorithms are inflexible and outdated, and not based on the individual’s financial habits.
Whats more the corrupt banking system that created this mess by selling off dodgy debt is just punishing the lenders again for its mistake of buying dodgy debts in the first place, that was incidentally bailed out by guess who? yeah the public! Unfair .. clearly someone should be in Jail for this mess!
> By increasing the duration of a mortgage to 30 years
Already done, I think, some take out 35 years..
> It’s not possible for the government to control house prices.
However it is possible for them not to stoke them.