In past weeks, I have written about the unsustainability of housing prices. Speaking with people, one notes that there is now a general feeling that housing prices have gone beyond what is acceptable, let alone what is sustainable. Data published by the NSO also confirms this.
The National Statistics Office publishes a property price index that measures the aggregate increase in prices of apartments and maisonettes and the aggregate increase in prices of terraced houses together with apartments and maisonettes. Admittedly, prices depend greatly on location, apart from actual size and the year the property was built. As such, averages are highly indicative but do hide outliers.
The published data is reproduced in the below table. The Property Price Index is also compared to the annual inflation rate, to get a dimension of how some people are really raking it at the expense of the many. I also reproduce the percentage change year on year to understand further the picture.
The data speaks for itself. However, it is worth noting that between the end of 2016 and the end of 2020, the total property price index increased by 19.7 per cent, while the aggregate index for apartments and maisonettes increased by 33.65 per cent. During this same period, the cumulative rate of inflation increased by 4.13 per cent.
If one compares these changes to the change in the average yearly basic salary between 2016 and 2020, as published in the Labour Force Survey, one notes that the average salary increased by 3.97 per cent, while property prices increased by 19.7 per cent. The increase in property prices outstripped the increase in the average basic salary by just under five times. If we look at the index for apartments and maisonettes, the comparison is even more shocking – a 33.65 per cent increase compared to an increase of 3.97 per cent, an increase that is more than eight times greater.
This data gives an indication of the hardship young people had to suffer because of a housing market that has failed. Housing may still continue to be bought but it is evident that housing is not affordable, and it has not been affordable for a couple of years.
People above a certain age had a better shot at buying a home and starting a family than young people today, and we cannot have a country where the rising generation is shut out of the dream of home ownership. This was a right that successive governments had sought to encourage and even guarantee.
It cannot be claimed that such high prices are the result of a shortage of new housing. Blocks of apartments continue being built in the place of terraced houses.
Neither are interest rates a problem as they have never been so low and only now are they expected to increase.
The only reason for such spiralling prices of housing is market speculation, and action is required to stop it immediately.