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New data analysis from the Office for National Statistics (ONS) has revealed a further gap between house prices and average annual earnings of employees in England and Wales.
While UK residents typically spent 7.2 times their earnings on a property in 2007, recent data showed that in 2016 buyers would spend on average 7.6 times their salary.
The gap between income and house prices varies hugely across England and Wales. Buyers Copeland in Cumbria had to pay 2.8 times typical local earnings for a home, while in Kensington and Chelsea the typical property costs 38 times the average annual income of residents in the area.
A recent report by Shelter suggests that almost eight out of ten families across England are unable to afford newly built homes in their local area.
Henry Pryor, property commentator, argues that affordability levels are less relevant for some buyers.
“Up to 40% of buyers do not have a mortgage, they are cash buyers for whom affordability isn’t an issue and for whom there is no link to their income,” he said. “Half of
“Half of people who own a home have no borrowings. The unearned and largely untaxed money they have made simply by living in their property isn’t recorded in inflation figures but it is a significant part of what maintains house prices and drives the economy.”
The gap between house prices and income have led the Organisation for Economic Co-operation and Development to class the UK in the category of countries “where houses appear overvalued but prices are rising”. The OECD warned that economies in this category, which also include Canada and Australia, are vulnerable to the risk of price corrections.
Andy Sommerville, director at Search Acumen, said: “Evidently, the 21st century has seen home-ownership pushed far into the distance for many young professionals but we are now in danger of Generation Rent encompassing house hunters of all ages.
“The huge gap between earnings and affordability is extremely worrying. Prospective buyers are more stretched to buy property in every single local authority than they were before the turn of the millennium. It is not simply the fault of wages, it is down to the gaping hole between demand and supply in our property market.”