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Housing affordability at ‘most-stretched’ ever, with property prices 7.1 times earnings

Christina Hoghton
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Christina Hoghton

The cost of a typical UK home has risen 16.8% since the start of the pandemic, while wages are up only 2.7%

The cost of a typical UK home is now 7.1 times average earnings, according to Halifax – its highest-ever level.

In the first quarter of 2022, the cost of a typical UK home was £279,431, while the average annual earnings of a full-time worker were an estimated £39,402.

Property price inflation has outstripped earnings growth in the last few years, said the lender.

Average house prices are up 16.8% since start of the pandemic while average incomes have risen just 2.7%.

Regional split

London remains by far the most expensive place to buy a home, with an average property price of £534,977.

That’s despite the capital seeing the slowest rate of house price growth of any UK region over the last two years, at just 5.9%.

The North East of England is now the most affordable region in which to buy a home, with an average house price of £162,692 and a house price to income ratio of 4.6. It’s also more affordable than it was back in 2007, when the ratio was 5.8.

At a local level, Westminster and City of London are the least affordable areas, where average prices are an eye-watering 14.5 times average earnings.

Inverclyde in the west of Scotland is the most affordable place to buy a home, with typical house prices just 3.1 times average earnings.

First-time buyer affordability

The average first-time buyer house price ratio is 5.6 times average earnings, compared to home movers at 8.5 times income.

Despite the stretched affordablity ratios, first-time buyers continue to find a way onto the housing ladder.

Halifax said this is because many are joint applicants drawing on two salaries or benefitting from other sources of funds, such as the ‘bank of mum and dad’.

Also, with the average first-time buyer now 32 years old (three years older than a decade ago), they are likely to be more established in work with potentially higher earnings, according to the lender.

Andrew Asaam, mortgages director at Halifax, said: “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.”