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Rising House Prices Extinguish Home Ownership Dream

Recent research from the Bank of England suggests that middle class families all over the country are giving up their dreams of home ownership, discouraged by rising costs and a limited supply.

The Bank’s yearly survey of household finances indicated that close to half of all families who don’t own their own home are convinced that they never will. This survey represents close to 4.5 million households, and compares to the 32% who said they were confident they would one day be able to buy.

While 11% of the 2,000 Britons who had given up on home ownership preferred to rent, a higher percentage said that for them, affordability was the biggest obstacle.

The Resolution Foundation carried out an analysis showing that 25% of the country’s wealthiest households (those that earn around £60,000 annually after taxes and benefits) believed that they would never own a home, while a third of families in the next income range said they were likely to keep renting.

More than half of the non-homeowners in the poorest income segment said it was not likely they would ever buy.

Matthew Whittaker, the Resolution Foundation chief economist, said that the country’s perpetual housing shortage was threatening its reputation as a nation of homeowners.

Mr Whittaker said that at one time, anyone who went out to work and earned an honest living could expect to buy a house, go on holiday every year, and save for a pension. This scenario has changed, for middle income earners as well as the poor.

While 11% of the 2,000 Britons who had given up on home ownership preferred to rent, a higher percentage said that for them, affordability was the biggest obstacle.

The survey indicated that 46% of households could not afford deposits, estate agent fees, and other up-front costs, while 33% said that mortgage costs were beyond their means.

Official data suggests that home ownership in Britain has fallen from 73% in 2007 to 65% in 2015.

Chancellor George Osborne acted on the Autumn Statement by doubling the housing budget to £2bn annually. This move, which takes effect in 2018-19, is intended to increase supply and build 400,000 new properties by the time the decade ends.

Specialists in Construction Insurance

Mr. Osborne also introduced measures to help first-time buyers acquire a home, such as Help to Buy and the extension to Right to Buy to housing association tenants.

Mr Whittaker warned that putting up more homes was the only real way to handle the housing crisis. Otherwise, he said, it was akin to people wanting to buy more sweets: providing more money when there aren’t enough sweets to go around doesn’t help.

EY carried out separate research, the results of which show that house prices are expected to surpass earnings growth in two-thirds of the UK by 2020. It also reveals that prices would consistently grow more quickly than wages in London and the south of England for the remainder of the decade.

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