Britain's property market is going to implode as housing nears peak affordability

Britain's property prices may be surging due to the horrendous supply and demand imbalance - but that is set to implode.

Why? - because Britons are not earning enough money to either get on the housing ladder or are spending such a large bulk their wages on either rent or a mortgage that it is not sustainable.

Well, not unless everyone suddenly got a huge pay rise over the next year or so.

That's the assumption when looking at the latest figures from think tank Resolution Foundation which showed that lower and middle income households are spending a huge 26% of their salaries on housing, compared to 18% last seen in 1995. In London, households spend 28% of their income on housing.

The think tank remarked that this is the equivalent cost of the government adding 10p onto income tax.

Only the rich are ok and not feeling the pressure of rising house prices. Higher income households spend 18% of their income on housing, compared to 14% in 1995.

The average price to buy a house in Britain now stands at £291,504, according to the Office for National Statistics. Meanwhile, the average London property price is at a huge £551,00o.

To put this into perspective, Resolution Foundation estimated that median income is only around 3% higher than it was when the credit crunch hit in 2007 to 2008 at £24,300.

Take a look at the chart provided recently by Citi which shows that the house price to earnings ratio is near the pre-crisis peak.

Considering the average deposit to secure a home is around 10% of the total property price, this means Britons are taking on huge amounts of debt and eating into the little savings they have to buy a home.

People are taking on more debt because interest rates have been at a record low since 2009 at 0.5%. Lower interest rates make the cost of borrowing cheaper so servicing a mortgage is somewhat manageable.

However, if interest rates were to rise - and they will eventually - it could prove a major problem for people affording to own or rent a home. Already, if Britons are spending 25-28% of their salaries on housing, any rise in costs associated with property could be a killer. Households need to spend money on bills, transport, food, clothing, and of course if you have children, your money has to stretch further.

"Spiralling house prices and stagnating wage growth created a growing wedge between housing costs and incomes, which peaked on the eve of the crash," said Lindsay Judge, senior policy analyst at the Resolution Foundation.

"Falling housing costs helped soften the living standards squeeze for many households during the downturn. But these costs are rising again and risk holding back the living standards recovery. This is particularly the case in London where any benefit from rising incomes is being wiped out by steeper housing cost increases."

Already, research from the Royal Institution of Chartered Surveyors, estate agent Savills, the Council of Mortgage Lenders, and bank analysts has said prices will continue to rise over the next five years. Even a study published by Santander showed average house prices across the country will more than double to around £500,000 over the next 15 years.

But wages are not rising are radically.

So, if people can't afford to buy or rent a property, there will be less people in the market and therefore put a dampener on prices. But considering the Resolution Foundation says that the tight income versus house prices is putting a strain on 3.3 million households - it can only spell bad news for the market.