The Great House Price Bubble? Panorama

Property prices are rising at their fastest rate for years. Estate

agents are kind of acting like bouncers. There were 156 confirmed

to come today and look round the property. We are finding there is a

real sense of urgency in the market, people wanting to buy a house and

get in and do it now. Many families are being priced out of the market

altogether. The goal posts of home ownership are going further and

further away. The Government's got a plan to help people on to the

housing ladder. I couldn't have bought the house without the Help To

Buy scheme, I would have had to wait a long time. So I know it's been

really useful and got me this house. But is it adding fuel to an already

overheating market? It's like pouring petrol over the car and

setting light to the whole thing. You might get a little heat in the

short-term but the end result is not actually what you wanted. And this

at a time when the effects of the last property crash are still being

felt. You have just lost your pension, your hopes, your dreams in

bricks and mortar. Tonight, Panorama asks: Are rising prices creating an

unsustainable property bubble? The British love their homes. And,

unlike some of our European neighbours, we love to own them.

Twelve years ago, home ownership peaked at around 70% of households.

Now it's falling. First-time buyers used to get an early start - eight

years ago two-thirds were under 30 and able to buy without any help.

But now, it's turning into a marathon. With only around a quarter

under 30 when they get the keys to their first home. Getting on the

housing ladder is becoming tougher and tougher.

You wouldn't know it, though, in the offices of estate agents. Hi, it's

Dean... More people work in property now than since records began 35

years ago. And with the economy picking up, they're busier than

ever. 23-year-old Dean Leslie is surfing the waves of the latest

property boom. So, as you can see, the market's very busy at the

moment. Probably doing about twice as much as we were last year and we

are finding there is a real sense of urgency in the market, people

wanting to buy a house and get in and do it now.

This has led to frantic scenes in some parts of London. I am a

first-time buyer looking for a property in East London. I am about

to go and look at one here in Walthamstow, an open viewing.

31-year-old Jono Leyton, who runs his own digital marketing company,

has a combined income, with his wife, of ?70,000. Today, he's

joining the queue to view a 2-bedroom flat. The guide price is

?250,000. It's quite tight on space. It's really nice. But it's not huge.

But more worrying than that really is just the number of people that

are going to be putting offers in on it. I heard the estate agent said

there were 156 viewings today. 300 people viewed the flat in three

hours, according to the estate agent. Basically the estate agents

are kind of acting like bouncers, it's like one in, one out. It's

madness, it's like being at a nightclub. The average price of a

property in the UK hit a record high of ?247,000 in August. Nationally,

prices are rising by almost 4% a year. In London, prices are up more

than 8%, in part fuelled by foreign buyers. In the East Midlands they're

up 3.8%, in the North West 2.3%, and in the South West prices are up

2.6%. Only in Scotland are property prices falling. So how did

first-time buyer Jono get on in East London? It was open for viewing just

on one day, on the Saturday. It sold on the Monday. It was on a guide

price of ?250,000. It sold for ?320,000. Do you think that sort of

activity prices you out of the market? Whether it prices me out

completely... Yeah. It might do? It might well, yeah. Some property

prices are rising so fast, they're forcing people into a punishing

financial workout. Research by the charity Shelter, reveals that in

over half the country, 90% of homes suitable for a family are

unaffordable to those on an average income. In some areas we found there

is no properties available to an average family such as Brighton and

Cambridge. In other places such as West Somerset and York only 2% or 3%

are there homes that were available to people on an average wage. An

opinion poll for Panorama suggests that 46% of people think property

prices are too high in their area. It also suggests that 10%t more

people want prices to fall than rise. That's a reversal from last

year. Traditionally, people in the UK have borrowed between

three-and-a-half and four times their income to buy a home. And that

has been seen as a sensible amount to borrow. But today, across England

the ratio is almost double that, with the average home costing almost

seven times average income. In parts of London, it can range from ten to

23 times income. And that can make finding the money for a deposit

increasingly difficult. Most tellingly, if you look at the

typical deposit on a typical first-time buyer house, and compare

that to the average income of someone on a low to modest income,

about ?20,000. Saving for the deposit used to take about three

years in the 1980s, early 90s, today that figure is 22 years. In truth,

people aren't saving up for 22 years to buy a house. We are seeing fewer

people entering the market in the first place. But help is now at

hand. Last April, the Government launched a new initiative designed

to help those struggling to save a deposit to buy a new home. Any

growth inside that box, Chancellor? The scheme's called Help to Buy and

can be used to purchase properties worth up to ?600,000. We are going

to help families who want a mortgage for any home they're buying, old or

new, but who cannot begin to afford the kind of deposits being demanded

today. Since the financial crisis in 2008, banks have required far bigger

deposits. The Government hopes Help to Buy is the answer. Buyers of new

build properties can get a loan for 20% of the purchase price direct

from Government, or, in other words, direct from the taxpayer. They only

have to dip their hand into their own pocket for 5% of the purchase

price. They then go to the mortgage lender with a 25% deposit and bingo,

they get their mortgage, and their home. The writing on the top says

the Gruffalo, what's that... Toni Stott is a primary school teacher in

Oldham. She's the type of person Help to Buy is aimed at. Earning

around ?30,000 - just above the national average - 25-year-old Toni

has always been keen to buy a house. She's used Help to Buy to fight her

way onto the housing ladder. Thanks to the scheme Toni bought her

new 3-bedroomed home two months ago with just a 5% deposit. What was it

like when you came first to have a look at the house before you bought

it? There was only one house left of this style that I got. There was me

and one other girl looking round. I remember saying to the lady, she

can't have it, it's going to be mine! She's like OK, we will sort it

out. It looks a lovely house, are you going to show me around? Do the

grand tour, you lead and I will follow. We will start with upstairs.

It cost ?125,000. Without Help to Buy it would have taken her years to

save for a deposit. This is the bathroom. Green accessories at the

minute, but I think we are going to be that to a nice bright pink.

Nothing that a trip to the local DIY store can't fix. Home-owners

spending here boost the economy. What's more, increased construction

leads to more employment. Shall we go with that one? That one? Yeah.

There's no doubt that making a new home - with a little help from your

friends - is exciting. And there was light! Fantastic.

Let's go and do the others. Do you get the sense that everyone's

snapping them up? Yeah, they seem to have gone up quite quickly and gone

quickly. Could you have bought the house without Help To Buy? No, it's

been really helpful for me. I would have had to wait a long time for it

to happen. It's been really useful and got me this house. So far, more

than 12,000 people have taken advantage of this phase of Help to

Buy. But will it kick-start the construction industry as the

Government hopes? It's estimated that 240,000 new homes will have to

be built in England every year for 20 years to satisfy the need for

housing. What we have had to do during the economic downturn is slow

down in lots of cases the pace of build because we've not got enough

customers able to access the mortgage market to buy our

properties. As those customers are able to access the mortgage market,

through Help To Buy, through funding for lending, through a general

thawing in the lending criteria, then we are increasing the rate of

build as fast as we can to meet that demand.

There are signs that Help To Buy is having an impact. There's been a 6%

rise in the number of new homes being built since the scheme was

launched. But critics question whether Government intervention in

the housing market will do more harm than good. I think Help To Buy is

really the wrong solution to the problem. We have a very clear

problem which everybody recognises, which is that house prices in

Britain are too high. Now there are two solutions to that problem. One

is to help people borrow a great deal more money than they can afford

to borrow to pay prices that are too high. The second solution is to

allow prices to come down to a level at which people can afford to buy

them without taking on undue levels of debt. Now if I were in charge, I

would say that the second solution would be a significantly kinder

solution than the first. In Yorkshire, the north-east, in

Scotland, house prices have moved very little or in some cases have

gone backwards and that's reflecting where wages are and what money

people have to spend. The Government avenues got a responsibility to

address the housing market right across the country, not just in

active areas like London. There is something very odd about

the current property price boom. Taking account of inflation property

prices are rising at the same time as wages are falling. Over the last

four years, real wages have fallen to the level they were a decade ago.

That's partly because basic costs have rocketed - food's up 17%,

energy prices up 23%, transport costs are up 38%. That's creating a

punishing gap in many people's finances.

Abi Reilly is a special needs school teacher living in Reading with her

husband Chris and two children, five-year-old Daniel and

four-month-old Elsie. They rent a terraced house but would like to

own. Do you feel that home ownership is a realistic goal? No, it feels

too far away. Too far away. Pay for the average worker stays the same,

well, teacher's salary has certainly been frozen. My husband's salary has

probably gone down. How can we save for a deposit when our rents are

going up? Energy is going up. Everything is going up. Wages stay

the same. House prices go up. Mathematically it doesn't work. Abi

and Chris have moved 13 times in the last ten years. They're among the

8.5 million people renting privately in England today - more than at any

stage since the 1970s. More than half want to own a home but can't

afford to. It's wanting to put down roots with the family in a

community. Where we live now, we absolutely love. We've got a very

good school for Daniel. I want to be able to know that I can stay in that

area and bring my children up there, but really, even if I am a really

good tenant, if my landlord wants his house back, he gets his house

back. The Help to Buy scheme is meant to

open doors to families like the Reillys, but for Abi the maths still

doesn't work. I've looked into it and you still need 5% of a deposit.

Well, 5% of a value of a house in Reading that we would need is still

unachievable. How long would it take you to save a 5% deposit? By the

time we'd saved up the children would be grown up, put it that way.

About 20 years probably. Abi and Chris together earn around ?38,000 a

year. Even if they could find the deposit, using Help To Buy, they'd

have ?175,000 to spend. The only property we could show them within

their budget and where they want to live is a one-bedroom flat for about

?130,000. Here it is. Shall we have a look? Let's go and have a look.

You first. You have to do a little bit of a

dance here, because this is the shower room. No bath, I'm afraid.

OK. That's going to be an issue with the baby. That's the toilet. This

is, I'd say the master bedroom, but it really is the bedroom. This is

it. All four of you would have to sleep here. A bit depressing. I

would love to own a home but it would need to be a home that can

accommodate us. Which this can't. No, and as we have discussed it's

the price range. So Help to Buy's no help to Abi, because what's suitable

in her area is too expensive. She's left with no option but to continue

renting. What we are seeing is the largest number of families ever in

the private represented sector shall - rented sector, paying effectively

dead money for properties that they've only got six months. We are

also seeing a group of families stuck in properties that they can't

afford to get out of and may have two or three children and can't

afford to get a bigger property and are struggling to keep their

families going in those circumstances. So whether renting or

owning, how much do we spend on keeping a roof over our heads? Our

survey suggests that of those who don't own a property outright 31%

are spending more than a third of their disposable income on housing.

But according to organisations like Shelter, spending more than 35% of

disposable income on rent or mortgages can leave people unable to

afford other basic needs. The situation has certainly reached

crisis point for single dad Chris Whatley. We have pizza for tea,

darling, yeah. He lives in a council flat in Salisbury with his

15-year-old daughter who stays with him at weekends and 20-year-old son.

Some chips, I think. A bit of salad, as well. Chris works full-time in a

job that pays about ?850 a month after tax, well below the national

average. He doesn't receive any benefits, other than the council

flat he lives in. Hi, Chris. Hi. I am Adam, nice to see you. Under half

my wages goes on my rent, you know, and then you've got your council tax

to pay. And that's before you do anything else, you know, that's

before you put a tin of beans in the cupboard, you know, you've got half

your wages are gone already. Have you got enough for food for the

family? Some weeks, no, in a nutshell. This time of the month,

another two weeks before I get my pay again and the cupboard can be

empty. How difficult is that for you? Well, for me, I can deal with

it, you know, but sort of for the kids, I am sure it's not, you know,

the best deal, is it really? After Chris has paid his rent, council

tax, energy bills and other monthly expenses he's left with ?40 a week

for food. That's around ?6 a day to cover all three meals.

So what about the meat here, can you afford that? Once in a blue moon I

can afford something like that, yeah. But ?6, sometimes that's all I

have to spend in a day. I could buy that, you know, but... There would

be nothing else? Not much going with it, know what I mean.

Looking at getting a couple of pizzas now... I don't like feeding

my kids rubbish, but sometimes I have no choice. Budget chips.

Earlier this year, Chris hit a financial brick wall. The only way

to feed his family was to accept free food from a charity. I got

introduced to the Trussell Trust, they gave me a food bank ticket,

which at the time was... Was it tough going to the food bank?

Um, mixed emotions, I suppose. I accepted it with the sort of grace

that it was given to me, you know. But, slightly embarrassing, I would

say, that's how it felt more than anything, you know. Does it get busy

in here? Yeah, I think it does. It was when I was here last, yeah. The

Trussell Trust run 400 food banks nationwide. Since April, they've

handed out emergency food supplies to over 350,000 people - triple the

number they helped in the same period last year. They estimate half

of the people they help are working. How significant is the housing

problem affecting your clients? Well, it's quite clear to us on an

anecdotal basis, meeting clients that many are choorsing between

paying -- choosing between paying the represent or eat -- paying the

rent or eating or paying the mortgage or have a repossession

order come in and eating and that's are the realities of today. Here you

go, my baby girl. I would like to be able to do more for my family than I

am able to. And years of not being able to do that kind of grinds you

down in the end. So, with some people being stretched to financial

breaking point, why are we seeing rising property prices? The answer,

at least in part, lies in the decisions taken inside that

building. The Bank of England has kept interest rates at their lowest

level for over 300 years. And that means that it has never been cheaper

to borrow money. With the added incentive provided by the

Government's Help to Buy scheme, you can see why demand for housing has

been rising. But borrowing is not going to be this cheap forever. The

market predicts the bank rate will eventually rise nine-fold from 0.5%

to 4.5%. Remember Toni Stott in Oldham who

bought her first home using Help to Buy? She's fixed her repayments for

three years. Are you aware that interest rates

have really never been this low? No. Not for hundreds of years. No! You

are not aware that this is a really unusual situation? No. Toni's

probably got plenty of room for manoeuvre with her mortgage

payments, should rates rise. But 600,000 households are now thought

to be in debt peril - that's spending more than half of their

disposable income on debt repayments. If the bank rate does

rise as predicted to around 4% it's believed more than a million

families could fall into serious debt. It's all about how much of

your income are you allocating to repayments and anything above half

is considered to be a warning sign for over indebtedness and the

position at the moment is we have about 600,000 families in that

position. In the future as and when interest rates start to rise that

number is likely to go up and if income growth doesn't kick back in,

in the way we might hope it does, we might be looking at a doubling, 1.2

million, or even higher. Right now, the very low bank rate is

helping many of us keep up our mortgages repayments. And that's

helped push repossession figures down. But you need look no further

than Northern Ireland to see what happens when people can no longer

afford to pay inflated property prices. When the property bubble

burst here it had devastating consequences. Property prices more

or less doubled between the years 2005 and 2008 and then quickly

halved in value. Now repossessions have become a major issue.

This is Londonderry. Before the crash Northern Ireland had

experienced one of the greatest property price rises in recent

history. Brian bought his house in Derry during the boom for ?140,000

and then remortgaged. In the boom times what did it feel like? Aha kid

in a sweetie shop. You know, there's loads of beautiful properties.

There's a load of mortgage men saying here, yeah, I can lend you

money. The bubble burst five years ago. Thousands faced bankruptcy,

including Brian. And the pain is still being felt.

This is the little cul-de-sac you used to live in? Yeah. As the

economy collapsed, Brian lost his job in IT and fell behind on his

mortgage. It's an embarrassment. You can't make this payment and you do

want to make it, you can't. From that point, that's when the pressure

starts because you're struggling to make that payment, you know, and the

next one's coming up. You are trying to get two up at that point and it

spirals out of control. Brian's house was repossessed last year. The

key was put under a flowerpot at the door, basically. I turned and left

and a van full of my possessions. He says the bank sold his house for far

less than he bought it. He's still in debt. In essence, you borrowed

too much? Yeah. Should they have lent me such a high loan to value?

No Was I glad to get that money at the time? Yes. Should you have taken

it? No, but that's hindsight. The paralysed property market created a

vicious after-effect that reverberated across Northern

Ireland. It's had lasting damage to the construction industry, to

individuals who are sitting in negative equity and today we are in

a environment where people are extremely cautious about the

property market even though prices now look reasonable given the state

of the economy. So that should suggest there's lessons that can be

learnt for that for other regions, particularly those outside of London

that bear more similarity to the particular case here in Northern

Ireland. But are those lessons being learnt

in the rest of the UK? Five years ago, the global credit crunch was

sparked off by a sub-prime housing crisis. Money was lent to low-income

borrowers to get mortgages they otherwise couldn't afford. Could

that be happening again as Help to Buy relaxes lending to those on low

to middle incomes? I think Help To Buy is making the situation worse.

It's like pouring petrol over the car and settingings light to the

whole thing. You might get a little heat in the short-term but the end

result is not actually what you wanted. The end result of Help To

Buy is higher prices and that's not actually what we wanted. We have

seen nothing yet to suggest there is anything going anywhere near a

bubble at this moment in time. We have seen a lot of activity in

London. There is some movement now, there is some confidence across the

country but a long way to go - I think we are only at 60% of

transactions that we were prior to 2008.

There's a second phase of Help to Buy where the Government partially

guarantees lenders offering 95% mortgages. So far, 2,000 have been

approved. But Help to Buy has drawn criticism from both the political

left and right. I think Help To Buy is the wrong answer to the right

question. The real question here is how do we support the millions of

families currently on waiting lists for housing who are hoping to get an

affordable home, whether to buy or to rent and are being offered a

scheme that could seat them put into unsustainable levels of debt, taking

on mortgages they simply can't afford to repay? We are looking at

essentially a political scheme to buy votes. This is I think something

that almost everybody who's interested in policy and interested

in making the housing market more sensible and more affordable is

opposing and really I haven't actually met anybody who isn't

involved in politics who thinks this is a good idea. The open people who

seem -- the only people who seem to support this are politicians and

people building the housing themselves. The only people who

support it are the people who make money out of it. I think that's a

cynical response. Tell me one who supports it. The customers out there

They're involved. You are missing that bit out, you are saying this is

all about profit. This is not just about profit. This is about people

getting on to the housing market. We won't know for some time what the

full impact of Help to Buy will be. But for now many predict that

property prices will continue to rise. As house prices increase,

wages remain the same and the cost of living generally rocketing, the

goal posts of home ownership are just going further and further and

further away. For Abi, and the thousands like her, only a fall in

property prices - back in line with average earnings - will help realize

their dream of one day, owning their own home.