The 'Lost Generation' of the Housing market

Young workers left 'moving back in' as houses remain unattainable

As we should all be aware, the country has just come out of a recession and so we are now in this stressful period of high interest rates as the government seek the appropriate tax revenue needed so that expenditure can be used to re-build the dishevelled circular flow. A fundamental part of infrastructure that needs improvement is the housing market. There needs to be more affordable homes as the real value of wages deteriorates over time.

Lack of investment in construction due to the period of recession is partially responsible for the inflation in house prices. Now beckons the time to act upon that, rehabilitating this weak area in the economy. A study conducted by the housing charity Shelter reveal that average earners would need a £29,000 increase in wages in order to cope with rising house prices. [data was collected using house prices ranging from 1997 to 2012 to generate a trend growth]

Exempting the previous calendar year, the relationship between house prices and the rate of inflation has been non-linear for the past 15 years. "In the London borough of Hackney, the average annual salary would need to increase by more than £100,000 to be in line with the rise in house prices."

At the start of this current year, the Office for National Statistics released figures which stated that 3.3 million adults between the ages of 20 to 34 were still living at home with their parents, not because thy were unemployed, but due to their incapability to match current house prices. This is proportional to just over a quarter of adults within this age range in the UK still at home. We're supposed to be living in a rapidly growing economy. What good are living standards increasing if the cost of living is out of reach to an extensive percentage of the population?