Official data reveals ‘worrying’ lack of property market affordability
The average disposable income in England must be multiplied 8.4 times to reach the average house price, a key multiple used by Ministers to assess property market health.
The Government has been warned that property ownership is becoming increasing out of reach for too many first time buyers after its own figures revealed yesterday that the multiple of disposable income needed to buy the ‘average’ home in the UK is 8.6.
This multiple, calculated by the Office for National Statistics (ONS), is created by dividing the annual disposable household income, currently £35,000, into the average house price of £298,000.
Any figure above five is deemed by the ONS to be unaffordable, with only Northern Ireland being able to make that claim, and used as an indication of overall property market health.
Shockingly, by this yardstick the ONS says just 10% of the highest-income households in England could afford an average-priced home, and that the last time homes could be deemed ‘affordable’ in England was in 2001.
Since then, which is the date that the data began to be gathered, house prices have increased 2.7 times faster than incomes in England, although in Scotland and Wales these increases have been less pronounced.
The reason many first time buyers do get onto the property ladder is the ‘bank of mum and dad’ with Savills reporting earlier this year that some £9.4 billion was spent by parents getting their offspring onto the property ladder, a figure that is expected to reach £10 billion a year or more by 2027.
Worrying picture
“The widening gap between house prices and household incomes paints a worrying picture for those looking to get on the property ladder,” says Mark Eaton, COO at longer-term lender April Mortgages.
“Homeownership is becoming increasingly out-of-reach for first-time buyers in particular, especially those on lower incomes and in the South of England.”
“The demand for good-quality housing is robust in this country, with millions of people hoping to escape the costly rental market. “A key stumbling block highlighted in this report is the ability to save for a deposit.
“The Government should be working with mortgage providers and developers to help enable more first-time buyers to purchase their ideal home with smaller deposits.”
