Building more houses makes property more unaffordable!


New-build homes make property even more unaffordable, according to research from a leading academic shared exclusively with This is Money.
Every 1 per cent increase in the supply of new homes causes the ratio between an individual’s mortgage payments and their income to worsen by 9 per cent. The finding of Dr Alla Koblyakova, of the real estate economics and investment research group at Nottingham Trent University, dispels the assumption that the supply of new-build properties alone helps to stem unsustainable growth in house prices.

‘The Government thinks that by increasing the supply of new homes, the overall cost of owning a property will come down,’ says Dr Koblyakova, from the university’s school of architecture, design and the built environment. ‘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.

Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-3526132/New-build-homes-aren-t-answer-rising-property-costs-prices-higher-make-mortgages-unaffordable-says-leading-academic.html#ixzz4U2uQNtxw

This just shows that the housing market does not operate in the way that some people think. There are a number of factors that influence prices including mortgage policy, who the buyers are, income tax levels and lots of others.

Beware of simplistic statements!

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