Guernsey Press

Trott wants average house prices to drop by a third

AVERAGE house prices would need to come down by about a third to meet a new aim set by Policy & Resources president Lyndon Trott.

Policy & Resources president Deputy Lyndon Trott. (Picture by Tony Curr, 33119426)

The average purchase price was £610,000 at the end of last year – about 15 times the average working person’s annual earnings.

Deputy Trott wants the States to work with the private sector and other providers of housing to get the figure of 15 – known as the price-to-earnings ratio – down to between nine and 11, which would mean reducing the average purchase price to between £370,000 and £450,000 at today’s values.

Deputy Trott told the Guernsey Press Politics Podcast that he had given ‘quite a lot of thought’ to alleviating the island’s housing affordability crisis during his first 100 days as P&R president.

‘Clearly, 15, 16 or 17 times median earnings is absurd and completely unsustainable. It is reckless to allow that to continue,’ he said.

‘I think the very best we are likely to achieve in the foreseeable future is something that gets down around single digit multiples. If we could get down to nine or 10 times, even 11 times, as an average, I think that could be regarded as a success.’

Deputy Trott believed that his aim of reducing the average house price to not more than 11 times average earnings could ‘potentially’ be achieved in the foreseeable future as long as the island avoids economic shocks over which it has no control, such as volatile interest rates or another pandemic.

But Environment & Infrastructure president Lindsay de Sausmarez, which is responsible for general housing policy, warned against aiming for a specific average house price target.

‘Obviously we want to make housing more affordable, but I would be reluctant to put an exact figure on it without being able to evidence or substantiate that figure,’ said Deputy de Sausmarez.

‘If we are going to succeed, the average house price to average earnings ratio will need to move downwards, but plucking a figure out of the air is not the way I would go about setting a target.

‘This is a complex problem. We are working on a number of solutions. There is no silver bullet.

‘We are tackling a range of issues simultaneously, aiming to achieve a situation where everyone has access to housing that meets their needs.’

A report produced last year by housing consultants Arc4 showed that housing in Guernsey was less affordable than anywhere else in western Europe.

Since 2009, average house prices have nearly doubled, but average earnings have increased by less than a third.

Arc4, which has been advising E&I, said that even before recent increases in interest rates rental costs were almost twice what it considered sustainable and purchase prices were four times the level needed for sustainable mortgage repayments.

‘They found that we have had systemic unaffordability for more than two decades. It’s not a new problem,’ said Deputy de Sausmarez.

‘But the gap between average prices and average earnings has been growing, so the problem of unaffordability has been getting worse. Most worryingly, this has been at its worst in the lower quartile, which affects more people on average earnings or below.’

Deputy Trott said that average house prices would never return to four or five times average earnings, without a disastrous collapse in the island’s economy.

Arc4 advised that affordability was only one of a catalogue of problems causing the local housing market to fail and warned they would take years to put right.

‘It’s an important indicator, but it’s only one indicator,’ said Deputy de Sausmarez.