Housing Outlook is edited by Gavin Cameron, John Muellbauer, and Anthony Murphy. Our aim is to provide informative analysis of the UK housing market from our perspective as academic economists.

Click here to see a chart of UK relative house prices since since 1990...

The new National Housing and Planning Advice Unit (NHPAU) was launched last week, chaired by Professor Steve Nickell of Nuffield College, Oxford.

Their first report draws upon our house price modelling, in conjunction with a broader project coordinated by Professor Geoff Meen at the University of Reading, see Affordability Matters.

David Smith had a good discussion of this in the Sunday Times on 10 June:

"I can’t let the week pass without mentioning the Bank of England’s monetary policy committee (MPC), which sensibly decided to leave interest rates on hold at 5.5%, amid signs that its previous hikes may be starting to have an impact.

But I have to touch on the striking finding of the government’s new National Housing and Planning Advice Unit, chaired by former MPC member Steve Nickell. It produced the eye-catching conclusion that on unchanged policies housing for the poorest 25% of the population, typically first-time buyers, will be 10 times their earnings in 20 years.

The unit’s initial report, Affordability Matters, is a call to arms, and in particular a call for more housebuilding. Its affordability model, developed by Reading University, has some interesting properties, so: if real incomes rise 1%, house prices will rise by 2%; if interest rates rise 1%, house prices will fall by 3%; if the housing stock increases by 1%, house prices will fall by about 2%; and if the number of households increases by 1%, house prices will increase by 2%.

Many first-time buyers, of course, continue to look for a housing crash to deliver affordable homes into their laps. The report says this does “not reflect market fundamentals – demand for housing, driven by economic and population growth, continues to outstrip available supply”. The best long-term way to make housing affordable, in other words, is to have a lot more of it."

The latest data from the Halifax estimate that house prices rose by 0.3% in May with year on year growth of 10.6%. The Nationwide data show a rise of 0.5% in May with a 10.3% annual rise. Hometrack reported a monthly rise of 0.6% in May.

The Land Registry data show a 8.3% rise in the year to March 2006, with a 1.0% rise in March itself.