High-priced homes give fits to young Brits

Rachel Richards lied about her salary to buy hers. Anna Lofthouse borrowed heavily from her family. Rachel and Jonathan Lisher simply couldn't afford one.

Across southern England, particularly in and around London, young professionals with respectable jobs and good incomes are finding it harder to buy a home. Britain is the epicenter of a real estate boom - and perhaps a bubble - with the fastest-rising housing prices in the world.

In London, the average price paid by first-time buyers is now close to £200,000, or $330,000 - more than three times what it was 10 years ago, according to Halifax, a mortgage lender. Yet average salaries are well below £40,000 ($67,000).

"Even in dual-income households, key workers such as nurses and teachers can only afford to start buying their own home in very limited parts of London," says Steve Wilcox, professor of housing policy at the University of York and author of a recent report entitled "Can work - can't buy."

Last year, British housing prices surged 25 percent and are set to grow by more than 10 percent this year, according to Nationwide Building Society. By contrast, the US market rose 6.9 percent in 2002. London is now more expensive than New York when it comes to buying a midtown, two-bedroom apartment, according to a recent study by The Economist.

The causes for the price boom are myriad. Demand for housing is higher than ever as family breakups and longer- living retirees mean more and more people live on their own; the lowest interest rates in 50 years have made home loans cheaper; many people now buy second properties to rent out; and anecdotal evidence points to an influx of wealthy foreigners, many from Eastern Europe, buying up large chunks of London real estate.

Britain is not the only European country experiencing a price boom. Geneva has reported its worst housing shortage ever. And Spanish housing prices have doubled in the past seven years.

Yet Britain has a higher proportion of homeowners than most European countries - and less space to put them. Britain is a densely populated island, particularly in the south, and tough conservation rules make it hard to find land for new dwellings.

The problem has become so chronic that many experts are warning of a crisis in public services as modestly paid teachers, nurses, and police officers are forced to renounce jobs in the greater London area because they can't afford to live there.

"People, our people - nurses, teachers, public sector workers, ordinary hardworking families in high-demand areas - are being priced out of their own communities," thundered deputy prime minister John Prescott recently.

Take the Lishers. Rachel is a doctor in a busy London hospital, Jonathan a teacher in a school north of the city. But even with their double income, the amount they could borrow is not nearly enough to afford a starter home.

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