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Last Updated: Thursday, 7 June 2007, 16:22 GMT 17:22 UK
Homes 'to cost ten times salary'
Model house
In future it could cost ten times salary to buy a home
UK house prices could rise to the equivalent of 10 times average salaries by 2026, a newly-established government think tank has said.

To avoid this, more homes must be built in order to boost supply, the National Housing and Planning Advice Unit (NHPAU) study said.

At present, a typical UK home costs the equivalent of seven times salary.

But the estimate depends on the number of homes built remaining at the 190,000 a year predicted for the next decade.

Currently 168,000 homes a year are being built.

The figures for affordibility look at the median earnings of the lowest 25% of earners, and the lowest 25% of house prices.

"First-time buyers have seen a big rise in the deposit needed to buy a home and the amount of their income spent on mortgages," said Professor Stephen Nickell, chair of the NHPAU.

"Demand for housing is growing and unless action is taken, pressure on the market will only get worse," Professor Nickell added.

Housing shortfall

The NHPAU has been set up to advise policymakers on housing.

In 2004 the government's Barker review recommended a substantial increase to new house building to curb ever-increasing house price inflation.

The government has announced several major house building projects around the UK and has moved to ease planning regulations.

First-time woes

Housing and Planning Minister Yvette Cooper seized on the report as evidence that local and regional government should support proposals to encourage more house-building.

The predicted 190,000 homes a year figure for new-builds "simply won't do enough to help the next generation of first-time buyers", she said.

Ms Cooper's ministry, the Department for Communities and Local Government, is the parent body of the NHPAU.

At present, house building is still lagging behind the number of new households forming each year.

On Thursday, the Halifax, the UK's biggest mortgage lender, said house price inflation eased a little in May to 0.3%.

However, the annual rate of inflation stands at 10.6% more than double the rate of increase in average salaries.

UK house prices have more than doubled since the late 1990s.

One first-time buyer who is trying to buy a house

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