HC Deb 26 July 1972 vol 841 cc1806-7
19. Mr. Hardy

asked the Secretary of State for the Environment what was the proportion by which house prices increased in the last 18 months, and the amount by which house prices increased more than that of the cost of labour and building materials in the same period.

Mr. Eyre

Between the fourth quarter of 1970 and the second quarter of 1972, average new house prices are provisionally estimated to have risen by 34 per cent. House prices are made up of a complex of factors such as land prices, overheads and margins, quite apart from the cost of labour and building materials, and the amount of different elements will vary in differing circumstances and locations. It would be misleading to try to quantify them.

Mr. Hardy

Is not the rate of increase in the price of houses 50 per cent. greater than the rate of increase in the cost of labour and materials, and is it not, therefore, reasonable to conclude that this explains to a great extent why so many young couples—the majority of them—cannot now afford to purchase their own homes, whether in Epping or in South Yorkshire? Is it not a scandalous situation?

Mr. Eyre

The Government are determined to encourage the rising output of the private sector to deal with this problem. Young people are holding their own in these circumstances. In the first quarter of this year, 24 per cent. of all mortgages went to people earning not more than £30 a week, and the proportion of borrowers under 25 rose from 20.5 per cent. in the last quarter of 1971 to 22 per cent. this year.

Mr. Tebbit

Can my hon. Friend confirm that over a good many years the rise in house prices has been about in line with the rise in wages, and that the price of houses is governed not so much by the cost of building in the new house market as by the price which can be obtained by the sale of second-hand houses, this being a function of wages and of the availability of credit?

Mr. Eyre

My hon. Friend has mentioned one of the substantial factors in relation to the rise in prices. I am glad to say that, thanks to the greater flexibility in the option mortgage scheme, the proportion of new option mortgages to all mortgages is rising.

Mr. Douglas-Mann

Will the hon. Gentleman take it that the facts stated by the hon. Member for Epping (Mr. Tebbit) are correct to the extent that, over many years the rise in house prices was closely related to the rise in wages and materials but in the 12 months following publication of the White Paper in June, 1971 and publication of the Housing Finance Bill later, there was a rise of 31 per cent. in house prices but a rise in costs, based on the first six months, at the rate of only 4 per cent. per annum? Will the hon. Gentleman consider the figures which I gave in the debate last night and accept that the Housing Finance Bill is the major factor contributing to the astronomical rise in house prices?

Mr. Eyre

There is no foundation whatever for that suggestion.