Cable: Property “unaffordable” for middle earners
He warned that rising house prices are a “very bad thing” for young families, with fluctuating house prices widening the gap between existing and aspiring homeowners, lowering social mobility.
Cable said to the Independent: “A family on average income is nowhere near able to afford a house at the average price.
“Property has become much more unaffordable for people on middle incomes.
“The fundamental problem is a chronic imbalance between supply and demand. A recovering mortgage market is just fuelling demand again.”
The business secretary blasted Kris Hopkins, the housing minister, who told BBC Newsnight that rising house prices are a good thing.
Hopkins maintained “we are nowhere near the peak at this moment in time”, added that Help to Buy has accounted for just 0.5% of transactions in the last quarter of 2013.
Cable added: “I do not agree with Kris Hopkins that rising house prices are a good thing.
“If you are an owner-occupier who has paid off your mortgage, it is an increase in your paper or real wealth.
“But if you are a young family trying to get into the housing market and it is unaffordable, it is an extremely bad thing.”
In the mid-1990s the average house price was three times the average earnings, Cable said, yet now, at roughly the same stage of the economic cycle, the ratio is around 5.5.
The Liberal Democrat was alarmed by Nationwide Building Society’s figures this week, which found that prices in London have risen by 18% to £362,699 on average in the past year.
Cable said: “We have taken some very good measures in government like allowing those areas with severe need for additional housing to increase borrowing against their assets to build new houses.
“We’ve made financial help available to small businesses in the building trade to increase competition and introduced one for one replacement of council housing every time one is sold.
“The number of council houses actually fell under Labour. But more needs to be done. We must build many more houses – that and only that is the solution to our housing problem.”
Help to Buy has enabled 17,395 home sales to go ahead, while the average value of the property sold is £194,992, with 88% going to first-time buyers and 77% outside London and the South East.
George Osborne, Chancellor of the Exchequer has acknowledged problems of housing supply, admitting the government needs to be “vigilant”.
He said: “I think we have to keep a close eye. Clearly house prices have started to rise. But that is why we have created the Financial Policy Committee.
“Ultimately, I want to live in a country where people who have the aspiration and who can afford to buy their own home are able to do so, and that means that we need to build homes for them.”