Deposits for houses in parts of the UK could reach as much as £500,000 by 2047, according to analysis of historic data.
Estate agent Coulters looked at UK House Price Index data going back as far as 1995. Its analysis found Brighton and Hove could experience the biggest house price growth, with the average property predicted to top £3.4m in 26 years' time.
Other areas Coulters’ analysis tipped for more than 500 per cent house price growth over the next two decades included Cambridge, Bristol, and Southend-on-Sea.
| Local Authority | 2021 house price | 2021 deposit (15%) | 2047 house price | 2047 deposit (15%) | % increase |
| Brighton & Hove | £400,636 | £60,095 | £3,400,141 | £510,021 | 748.7% |
| Hastings | £240,319 | £36,048 | £1,788,199 | £268,230 | 644.1% |
| City of Bristol | £316,177 | £47,427 | £2,288,776 | £343,316 | 623.9% |
| Thanet | £269,574 | £40,436 | £1,833,634 | £275,045 | 580.2% |
| Southend-on-Sea | £309,102 | £46,365 | £2,087,729 | £313,159 | 575.4% |
| Hinckley & Bosworth | £244,886 | £36,733 | £1,631,628 | £244,744 | 566.3% |
| Cambridge | £474,824 | £71,224 | £3,135,625 | £470,344 | 560.4% |
| Basildon | £334,523 | £50,178 | £2,181,497 | £327,225 | 552.1% |
| Brentwood | £445,723 | £66,858 | £2,898,590 | £434,789 | 550.3% |
| Hertsmere | £479,641 | £71,946 | £3,105,916 | £465,887 | 547.6% |
“Whilst deposits of £500,000 seem like a frightening prospect, the figures are based on historic data from a period which has seen some huge growth,” Graham Taylor, managing director and financial adviser at Hudson Rose, told FTAdviser.
As of June, HM Land Registry data shows house price growth was on an annual rise of 13.2 per cent. Coulters data is calculated based on house prices rising by 6 per cent each year.
“The key thing is to consider what will happen to incomes over the same period,” Rose continued. “With wages rising more slowly than house prices it seems like the affordability gap is set to continue.”
In February, estate agent Benham and Reeves calculated the UK’s house price to income affordability ratio at 9.94 - its highest level since 2011.
Marc von Grundherr, Benham and Reeves’ director, said “earnings have failed to keep pace with house prices”, which means “it’s very likely we could see this issue of affordability grow larger before it starts to reduce”.
For Rose, the biggest concern raised by Coulters’ research is the “widening disparity between the most and least expensive local authorities”.
Whilst Brighton and Hove’s average property price is projected to top £3.4m in 2047, Blackpool’s average property price is projected to top just £328,255. It means Blackpool is estimated to be more than ten times cheaper than Brighton and Hove.
Rose reckons investment from the government and a move away from London-centric policies will have to address this gap and “even the spread”.
Carl Shave, director at Just Mortgage Brokers, called Coulters’ 26-year predictions “eye watering figures,” before adding: “Dare I say, based on historical house price rises you can never say never.”
Shave continued: “If you went back in history 26 years and asked the opinion for the outlook on house prices, I doubt many would have predicted the huge increase we have experienced, so who’s to say these stated figures will not materialise, however unrealistic they may seem in current times.”
Crunching the numbers
Some experts have questioned the accuracy of Coulters’ projections, considering their longevity and the assumption that house prices will rise by 6 per cent each year for the next 26 years.
Whilst she called the research “fascinating”, Sarah Coles, personal finance analyst at Hargreaves Lansdown, said it ultimately rested on the assumption that these prices are guaranteed.
“The research takes average monthly growth rates since 1995, and projects them forward assuming house price rises will be the same in future as they have been in the past,” she explained.
“Unfortunately, history shows us that in practice, house price rises have tended to be far lumpier.”
Coles used the London borough of Kensington and Chelsea as an example, where house prices were growing at an average of 10.6 per cent between July 1995 and 2014.
“If they’d continued on the same trajectory to July 2021, they’d be worth an average of £2.7m.”
She continued: “However, changes in taxation, Brexit uncertainty, falls in demand from overseas buyers, affordability issues, and wider market weakness meant in fact by June 2021 they’d fallen to £1.2.m. So a prediction in 2014 would have been out by almost £1.5m.”
Similarly, Chris Hare, economist at HSBC Global Banking and Markets, told FTAdviser the numbers were "pretty punchy" and verging on "implausible".
With income rising somewhere between 3-4 per cent each year - based on productivity - he said it was unlikely the housing market would continue to grow year-on-year at 6 per cent.
But he also acknowledged that even if the UK's house price to income stabilised somewhat, housing price inflation could still happen.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said even though property prices continue to rise thanks to a combination of lack of supply compared with demand and cheap mortgage rates, a £500,000 deposit “seems to be an incredible leap”.
He added: “It would certainly strike fear into the hearts of first-time buyers in particular as it would take an unfeasibly long time to save up that amount of money.”
Harris said it was likely a greater deposit will be required in 30 years’ time than is the case now. “But whether it will be as much as £500,000, only time will tell.”
ruby.hinchliffe@ft.com
