Buying a home has become more affordable in nearly two-thirds of local authority areas in the UK in 2019, but is still more expensive than before the financial crisis in almost half of areas, according to research from Yorkshire Building Society.
The research, which measures the relationship between the cost of homes and earnings at a local authority level, found that wages have increased faster than house prices in 233 areas during 2019, improving affordability for homebuyers.
In some parts of the UK, where house prices have stalled or fallen, the prices of homes relative to earnings has dropped by more than 20%. For example, homes in South Bucks in the South East are 24% more affordable than a year ago, whilst affordability in Runnymede has increased by 20%.
However homes in 132 local authority areas have become less affordable, as house prices are still rising more quickly than wages.
For example, homes in Copeland in the North West are 32% less affordable than a year ago – but it’s important to remember that even with this increase the house price to average wage ratio in this area is still only 3.7, compared to the City of Westminster, where house prices are more than 20 times average earnings.
But despite these recent increases in affordability, house price growth has out-paced wage growth consistently since 2007 in 49% of all local authorities.
The gap in affordability between north and south has also widened in this period.
Lewisham (45%), Hackney (44%) and Camden (43%), in London, have both seen the largest deterioration in house price affordability in the capital since 2007. This is because house prices have increased three times faster than the salaries of people living in these areas.
By contrast, Inverclyde and North Ayrshire, both in Scotland, and Burnley, in North West England, have seen wages increase but house prices have fallen since 2007. In those areas, house price affordability increased by 39%, 36% and 36% respectively.
Nitesh Patel, strategic economist at Yorkshire Building Society, said:
In the past year, we’ve seen house price growth continue to slow, stall completely, or even fall. At the same time, salaries have increased, which means wage growth has begun to catch up with house price growth. This is why we’ve seen more affordable house prices in the vast majority of places.
This is most striking in London, where six of the capital’s boroughs occupy the ten largest increases in house price affordability. But it’s important to remember, this is all relative. London still has some way to go before house prices are truly affordable for someone on median earnings.
On average, house prices in the capital are 13 times average earnings, with this increasing to almost 20 times in some areas. This means that buying a home in these areas may well be out of reach for people earning the average London salary, even in households where there are two working adults.
House prices have grown by an average of 43% since 2009 - twice as fast as earnings (21%) in the same period. The difficulty in affording to buy a home is one reason why house sales have not picked up in the past year, even though some of the key drivers for housing market remain positive.
The longer term outlook for people wanting to buy a home remains to be seen. Demand for homeownership is still strong and supply is limited, so over the short-to-medium term, house prices could increase faster than earnings. This may continue to cause issues for home buyers, particularly those buying their first home."
Article published by financial reporter- 12 December 2019