"Affordability ratios are bad around the UK'"
The average home sold in England was worth the equivalent of 8.7 times the average annual disposable household income in the financial year of 2021, a report from the Office for National Statistics (ONS) has revealed.
The ONS released Housing Purchase Affordability in Great Britain 2021 report on Thursday as part of its additional measures of housing affordability series.
The report found that in the financial year ending on March 31, 2021, the average house price in England was £275,000 while the average annual income was £31,800, which is equivalent to a ratio of 8.7 years of income. In Wales, the average house price was £176,000 while the average annual income was £29,400, for a ratio of 6.0 years of income. Scotland’s average house price was £166,000 while its average annual income was £30,300, resulting in a ratio of 5.5 years of income.
ONS said that while purchase affordability ratios for the average home are below their peaks in Wales (2007), and Scotland (2008), affordability ratios in England are worse than at any point since the series began in 1999.
Read more: Affordability hits rock bottom – for how long?
Across English regions, an average-priced home in the North East cost the equivalent of almost 12 years of income for a low-income household (10th percentile), compared with 40 years in London.
Indeed the North East was the most affordable region, with low-priced homes available at around five times, a 10th percentile or higher, disposable household income. In London, low-priced homes (10th percentile) are available at five times an 80th percentile or higher disposable household income.
“Affordability ratios are bad around the UK, but in England they are diabolical,” Ross Boyd, founder of mortgage comparison platform Dashly.com, said. “As for London, the capital is in a different dimension altogether when it comes to affordability. For low-priced homes to be available at five times a higher disposable household income is a farce. For the average person seeking to get on to the property ladder in the capital, it’s like climbing 10 Everests.”
Joe Garner, managing director at London-based property developer, NewPlace, commented that affordability has almost become an anachronism.
“In the capital, the affordability crisis is beyond extreme,” Garner said. “Insatiable demand from an ever-growing population, coupled with a limited supply of housing and a slowing production line of new build development will see a continued upward path of house prices. Factor in low wage growth, rising rates, and inflation and the outlook becomes even more bleak.”
Read more: UK houses are now less affordable than ever before – Halifax.
“Climbing the ladder is an incredibly tough task in today’s market,” Marc von Grundherr, director of London-based estate agent Benham and Reeves, remarked. “Only those with the financial collateral of an existing property can comfortably negotiate the cost of a property purchase. It’s not just an insufficient level of wage growth and the high cost of a deposit that is pricing many out of the market, there’s also the additional costs such as stamp duty and solicitor fees to consider.
“When combined, the financial hurdle to securing a foot on the ladder is quite staggering and so it’s no wonder that we’re seeing a move towards long-term renting as a lifestyle choice, not just a necessity.”
Jonathan Samuels, chief executive at specialist lender Octane Capital, said that despite a prolonged period of affordability with respect to mortgage rates and monthly repayments, the high cost of securing a mortgage alone has prevented many homebuyers from climbing the ladder.
“This is, of course, due to the fact that property values have increased considerably, but also as a result of comparably stagnant wage growth, not to mention the high cost of renting that prevents many from saving a substantial mortgage deposit,” Samuels pointed out.
For James Forrester, managing director of Birmingham-based Barrows and Forrester, the government has a “great deal to answer for when it comes to the plight of today’s homebuyer.”
“And the blame can’t be solely placed at the door of one mop headed buffoon,” he said. “For years, they’ve insisted on fuelling buyer demand while failing to address the severe reality of the housing crisis by actually building more homes, and this has pushed house prices to record highs.
“As a result, the initial cost of a mortgage deposit has also spiralled and now acts as a huge financial barrier, preventing many from realising their dream of homeownership.”
