The ratio has fallen from a peak of 5.84 in July 2007 to 4.56 in November 2008, taking it to its lowest level for more than five years (July 2003: 4.54)
The new Halifax First-Time Buyer (FTB) Affordability Review tracks housing affordability in 406 local authorities (including 32 London boroughs) across the UK. A local authority (LA) is classified as affordable if the average house price for a FTB is lower than the price someone on average earnings in the area can pay based on the historical average house price to earnings ratio of 4.0.
The review is based on data from the Halifax's own extensive housing statistics database and ONS data on average earnings
This is the first Halifax review assessing the affordability of housing for FTBs across the UK, and updates will be issued at least quarterly. The benchmark used to assess affordability is the 20 year historical average house price to earnings ratio of 4.0, with the calculation being based on a single income and it is, therefore, conservative.
The proportion of local authorities (LAs) in the UK where housing is affordable for a FTB has more than trebled in 2008. In 2008, the average price paid by a FTB was affordable for someone on average earnings in 14% of LAs compared to just 4% in 2007.
The number of LAs across the UK where the average property is affordable for a potential FTB on average earnings has increased from 18 in 2007 to 57 in 2008 out of a total of 406 LAs surveyed
The affordability situation for FTBs has improved in seven of the 12 UK regions in 2008. The largest increases in the percentages of LAs that have become affordable for FTBs between 2007 and 2008 are in Yorkshire and the Humber (from 0% to 40%) and Scotland (from 30% to 67% of LAs)
Similarly, housing is most affordable for FTBs in Scotland and Yorkshire and the Humber. Property prices are affordable for someone on average earnings in nearly two out of three LAs (67%) of in Scotland and four out of ten LAs Yorkshire and the Humber (40%)
There have been no increases in the number of affordable LAs in London, South West, West Midlands, Wales and Northern Ireland where the average property bought by a FTB remains unaffordable for someone on average earnings in all the LAs surveyed.
Martin Ellis, chief economist at Halifax, commented: "There has been a marked improvement in housing affordability in many parts of the UK. First-time buyers, in particular, are benefiting, especially outside the South of England and the Midlands. We expect this trend to continue in 2009."
