Why is no one talking about the affordability of UK property in REAL TERMS?
The public are often overly pessimistic about the affordability of UK property because of one critical factor: the media ignore inflation.
Consumer Price Index or CPI is the standard measure of inflation in the UK since Retail Price Inflation (RPI) was discredited due to overstating inflation.
On the 2nd May, by way of example, the Times’ Economic correspondent, Gurpreet Narwan, wrote an article titled “Wary would-be buyers keep lid on property prices”. In that article, and there are many like it with similar cautionary subtext, Narwan refers to house prices having risen by 0.9% in the year to April, according to Nationwide.
Depending on which year one looks at over the past 10 to 15, the results will naturally differ, but what Narwan and his contemporaries all too often ignore is that during that 12-month period up until April 2019, according to the ONS, inflation rose 2% and wage growth was close to 3.5%. So, what does that tell us? Property in the UK is now more affordable than it was a year ago. But that is not how the story is portrayed and so often is the case with similar reporting.
I’m an avid Times reader and I don’t mean to pick on Mr Narwan, but no one tells this story and its high time someone did. Eventually, the effect of rising incomes and inflation against stagnant house prices and rents will put a hard floor under prices (which some argue has now happened) and thereafter give rise to the next property boom.