The latest ONS figures reveal that on average, workers in England and Wales are paying 7.6 times their annual salary on purchasing a property.
Between 1997 and 2016, the average price paid for a residential property in these two countries increased by 259%. During the same period, individual earnings rose by 68% in the same period.
The gap between the most and least affordable parts of England and Wales has risen during the period, with affordability falling in all local authority districts.
Alarmingly, the least affordable areas are worsening at a faster rate than the most affordable, making the gap wider.
Shaun Church, Director at Private Finance, commented: ‘The yawning gulf between earnings and house prices highlights the extent to which the affordability crisis is worsening across the country. Limited access to mortgages at more than 4.5 times borrowers’ income means that, with the average house prices now 7.6 times greater than average earnings, buyers are having to find new solutions to get on the ladder – such as buying in couples, among friends or leaning on family for support.’
‘Growing numbers have found themselves excluded from the property market, but fortunately, low interest rates and mortgage repayments have gone some way to ease the pressures they face,’ he continued.
Moving on, Church observed that the imbalance between house price and earnings are particularly impacting on the young.
‘Younger would-be buyers are the biggest losers from the growing imbalance between house prices and earnings. The data reveals that in 1997 the average house price was just 3.6 times the average income, which would have been well within reach of a young couple looking to buy. The same couple looking to buy today would face an uphill struggle, and many find now themselves looking to their parents for help with a deposit or to act as a mortgage guarantor,’ Church noted.
‘Prices and incomes have grown particularly out of sync in the London market, and it isn’t surprising that seven of the country’s ten least affordable areas are in the capital. In boroughs such as Kensington & Chelsea the typical house price is now a mammoth 38.5 times bigger than the average income, which puts getting a foot on the ladder out of reach of all but the wealthiest buyers. Such an imbalanced situation creates obvious temptations for policymakers to interfere with the market. However, it is absolutely imperative that they avoid destabilising the housing market for political ends, as was the case with the changes to Stamp Duty last year,’ he concluded.