The ratio of house price to income has risen by an average 60 per cent in the UK between 1970 and today and some regions have fared worse than others.
Alliance Trust said that the ratio has worsened most in London, East Anglia and the South West, where it increased by 66 per cent, 65 per cent and 63 per ecnt respectively.
London is the least affordable region for today’s first-time buyers. House prices there are now 4.4 times income, against 2.6 times in 1970. The South East, where the ratio has climbed to 4.3 times income from 2.7 times 35 years ago, is the second least-affordable region. The lowest ratio of house prices to income is in Scotland where prices have increased to 3.2 times income, up from 2.4 times in 1970, followed by the North of England at 3.3 times today, from 2.3 times in 1970, and Yorkshire at 3.4 times against 2.1 times in 1970.
Between 1970 and 2005, the gap between the most affordable region for first-time buyers in the UK and the least has widened to 38 per cent, from 29 per cent. In 1970, the South East was the least affordable and Yorkshire was the most affordable but that ranking has changed. London has become the worst region for first-time buyers on a price-to-income basis, and Scotland, the best.
The region where house prices rose most over the 35 year period was London, where they climbed 3,432 per cent followed by the South West, up 3,427 per cent. They rose least in Scotland, where they were up 1,906 per cent. The average income of a first-time buyer has increased from an average £1,766 in 1970 to £35,937 last year.
Income growth has been very mixed, however, climbing most in the South West, London and the East Midlands, and least in Scotland, Northern Ireland and Wales. In Scotland, for instance, first-time buyers’ incomes were on average more than 26 per cent lower than in the South West last year, a turnaround from 1970, when incomes in Scotland were almost 7 per cent higher than the equivalent first-time buyer in the South West.
Shona Dobbie, head of the Alliance Trust Research Centre, said that a close look at prices, deposits and income by region showed that the key ratios have worsened for first-time buyers across the board but there are notable differences among regions.
Dobbie said: “These figures clearly show it is becoming harder for first-time buyers to break into the housing market. In recent years, buy-to-let investors have taken on the traditional role of first-time buyers in keeping the market going, but you really need first-time buyers to sustain prices over the longer term. Our research shows how much pressure these new buyers are now under.
“There are knock-on effects from the pressure on first-time buyers, such as the time now needed to build up a larger deposit. With so much time now being spent focusing on saving for a house and paying it off, people are putting off retirement saving for even longer.”
