Research carried out by Nottingham Trent University has shown that new-build properties may be making owning a home in the UK more unaffordable, despite it being widely believed that properties of this type actually help to stem an unsustainble growth of house prices.
Dr Alla Koblyakova, part of the university’s Real Estate Economics and Investment Research Group, conducted a market behaviour study which found that for every 1% rise in the supply of new homes, mortgage payment to income ratios in the UK deteoritate by 9%.
Dr Koblyakova said of the findings: "The Government thinks that by increasing the supply of new homes, the overall cost of owning a property will come down. 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."
As a result of these findings, she says it is vital that future affordability programmes focus not just on the supply of affordable housing but also on the provision of housing finance.
The research, which looked at the data of more than 1,700 mortgage holders between 2010 and 2014, borrowed from a wide range of sources, including the Understanding Society Survey, Bank of England Data Archive, Land Registry data and European Mortgage Federation publications.
"The main issue that property values in the UK go up faster than wages,” Dr Koblyakova added. “It’s not possible for the Government to control house prices. But it is possible for politicians to motivate lenders to offer longer mortgage contracts to reduce the size of monthly mortgage payments.
“By increasing the duration of a mortgage to 30 years, for instance, it’s possible to make owning a property more affordable for those on average incomes.”