Want to buy a house? That'll be 9 x your salary, thanks.
Houses have never been more expensive to buy and to maintain
In case you missed it: houses are now less affordable than they were in the Victorian era. That’s right, we’re back to a time when wealth inequality was so rampant, Charles Dickens wrote several novels about it.
Our modern housing crisis has escalated to a point where the average home costs nine times the average salary (and twelve times the average salary in London)1, yet most mortgage calculators on banking websites will still only offer a measly fourfold on your salary2.
UK house prices have soared to such an extent that some are now considering the whole thing a Ponzi scheme3. The market relies heavily on new buyers willing to pay increasingly higher prices, with the hope of eventually selling at an even higher price. I’ve got my hands over my ears waiting for the bubble to burst.
I am also curious about the potential future costs in upgrading properties to meet energy efficiency standards. A couple of years ago, the Department for Business, Energy and Industrial Strategy (RIP) published a consultation which proposed an energy performance certificate (EPC) league table for mortgage lenders4, which raised concerns that lenders would shy away from offering mortgages to properties with low EPC ratings5.
If we play out a scenario where lenders do restrict mortgages on energy inefficient properties, then house prices are even more frothy.
Wanting to own a home is a particularly British (pipe)dream, but have you seen the rental market? It’s hardly any more affordable, and only getting more expensive6. And rents are only set to get more competitive as EPCs matter way more for privately rented residential properties.
Following on from a consultation in 20207, all domestic rental properties will need to be an EPC C by 2028, otherwise landlords won’t be able to rent them out8. That’s less than five years away, which is gone in the blink of an eye in the property world. Considering that most properties in the UK are an EPC D9, I’m thinking there are two ways this could play out. Either a) landlords invest in upgrading their properties in order to remain compliant, but pass the cost onto their tenants, jacking up rents even more, or b) landlords get out of the rental market and sell off their properties. Which would potentially ease the supply constraint for people looking to buy a house, but then where will the renters live?
It feels like watching a car crash in slow motion. The housing bubble has to burst at some point, housing needs to be upgraded if we have any hope of meeting net zero by 2050, and people need to be able afford a place to live. If anyone has any good ideas, now would be a great time to hear them.
That’s what I found after checking most big banks online mortgage calculators. If anyone knows any different, I’d be thrilled to learn.