Enlarge imageBy Jennifer Hill
LONDON (Reuters) - Government house-building targets are insufficient to stave off a housing crisis, an independent body said on Friday.
The National Housing and Planning Advice Unit said the housing affordability crisis was set to deepen, despite government plans to build 240,000 new homes per year.
It said house prices could soar to up to 11 times average earnings, based on current building activity, from a current level of around seven times typical salaries.
Some 270,000 new homes per year are needed to "stabilise" the ratio of house prices to income, it said.
Professor Stephen Nickell, who helped write the report, told BBC Radio: "Our projections suggest that, if we stick to existing house-building plans, they (house prices) could get up to as much as 11 times incomes.
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"If, however, the government succeeds in getting their 240,000 plans a year going, then it would be somewhat less than that, but still as much as nine times average incomes."
The report said that properties in the southeast, southwest and east of England could become more expensive relative to average pay than those in London over the next 20 years.
Nickell said demand for housing across the southeast of England, excluding London, was growing very rapidly.
"Of course, there are lots of jobs being created in London, but more and more people are living outside London in the surrounding regions and commuting into London and that’s going to drive up house prices across the south of England," he said.
However, the economist said that other parts of the country would also feature in the "story of continually rising house prices" over the longer term.
"Across the country, we will see even further rises in the price of houses, even if the government’s 240,000-a-year target by 2016 is actually hit," said Nickell.
The unit was established last November in response to one of the key recommendations of a housing supply review which found that, during the last 30 years of the 20th century, house-building rates halved while demand for new homes rose by a third.
Its report comes on the same day as housing minister Yvette Cooper is expected to unveil funding to encourage local councils to help build millions of affordable new homes.
The plans also include measures to encourage councils to bring empty properties back into use.
An estimated 670,000 properties currently stand empty and nearly 300,000 in England are long-term vacant.
