Housing Affordability Hits Lowest Level on Record

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Research from Halifax has revealed that housing affordability has been reduced to the lowest levels on record.

Using data from the Halifax House Price Index they have found that property price inflation has continued to outstrip earnings. The cost of a typical UK home (£279,431) is now 7.1 times the average salary for a full-time worker (£39,402).

For comparison, at the start of 2020, Halifax’s data showed that the average UK earnings were £38,374 and that the average house price was £239,281 – This put the income to house price ratio at 6.2. However, it the past two years, house prices have risen 16.8% in contrast to earnings which risen by only 2.7%.

London remains the least affordable area in the UK at a ratio of 9.7. While the Northeast of England is the most affordable at 4.6 – the only region with an average under 5.

The report also highlights the continuing trend of people turning away from prime markets in major cities to pursue more space in rural location – Since the start of the pandemic, Westminster and the City of London saw the biggest increase in affordability across the nation. Dropping from a ratio of 16.8 to a paltry 14.5.

With regards to actually buying a house, those most affected by these increases in house prices are first-time buyers, who haven’t had the benefit of a corresponding increase in the value of their own properties. However, with the average age of a first-time buyer increasing to 32, people are further into their careers with higher earnings and often make joint applications in order to pass affordability checks – however the increased difficulty in finding a suitable deposit still remains.

 

Commenting on the research, Halifax mortgages director, Andrew Asaam stated: “There’s no question that the economics of buying a home have changed significantly over the last couple of years. Soaring property prices and slower wage growth have combined to stretch traditional measures of housing affordability.

“However, we also know from strong transaction levels that demand has remained extremely strong over that period, both from home-movers seeking bigger properties, and first-time buyers taking their first steps onto the ladder.

“With interest rates on the rise as a means of combatting inflation, it’s unlikely that house prices will continue to grow at the pace we’ve seen recently. This should see the gap between average earnings and property prices narrowing over time.

“It’s also important to highlight the responsible approach taken to mortgage lending in this environment, with lenders conducting thorough checks to ensure repayments are manageable even if interest rates rise more sharply in future.”

 

If you are curious what your home is worth in the current environment, you can book a valuation with one of our experienced agents here.

If you want to read the full report from Halifax, you can find it here.

Peter Austin
Peter Austin

Peter is a writer and photographer with a great interest in property, design, and the economy.

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