House prices 'need to drop a third to be affordable'

House prices will need to drop by 35 per cent in order to be within reach of the average homebuyer, according to latest research.

Paul Holmes, chief executive of Firstrung, said that his predictions for the house market are not positive, meaning that more people are choosing to rent property.

"I have been a doom monger where house prices are concerned for sometime, but my own belief is that market forces have run amok," he said.

Mr Holmes went on to say that house prices are currently 35 per cent above the trend line for affordability, which is pricing many people out of the market and leading them to rent.

Recent research from the Royal Institution of Chartered Surveyors (RICS) revealed that the average number of transactions per surveyor over the last three months is now at 15.3.

This is the lowest figure since the survey began and the net balance of agreed sales still remains negative and does not look like it is improving.

This follows news that a first-time buyer couple with earnings of £27,516 will now have to save over 100 per cent of their joint take home pay to afford the up front costs of a typical home.

Published 22nd August, 2008

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