Affordability gap rises to record levels

Affordability gap rises to record levels

ONS has reported that on average, working people are now paying around 7.6 times their annual earnings on purchasing a home in England and Wales.

According to ONS, the median price paid for residential property in England and Wales increased by 259% between 1997 and 2016; median individual annual earnings increased by 68% in the same time period.

The gap between the least affordable and most affordable parts of England and Wales has increased over the last 2 decades, with affordability worsening in all local authority districts.

Additionally, the least affordable areas are worsening at a quicker rate than the most affordable, making the gap between the most and least affordable areas widen.


The most affordable local authority in 2016 was Copeland, with house prices being on average 2.8 times greater than annual earnings, whereas Kensington and Chelsea was the least affordable with house prices being 38.5 times greater than annual earnings.

Shaun Church, Director at Private Finance, commented: “The yawning gulf between earnings and house prices highlights the extent to which the affordability crisis is worsening across the country. Limited access to mortgages at more than 4.5 times borrowers’ income means that, with the average house prices now 7.6 times greater than average earnings, buyers are having to find new solutions to get on the ladder – such as buying in couples, among friends or leaning on family for support.

Growing numbers have found themselves excluded from the property market, but fortunately, low interest rates and mortgage repayments have gone some way to ease the pressures they face.

Younger would-be buyers are the biggest losers from the growing imbalance between house prices and earnings. The data reveals that in 1997 the average house price was just 3.6 times the average income, which would have been well within reach of a young couple looking to buy. The same couple looking to buy today would face an uphill struggle, and many find now themselves looking to their parents for help with a deposit or to act as a mortgage guarantor.

Prices and incomes have grown particularly out of sync in the London market, and it isn’t surprising that seven of the country’s ten least affordable areas are in the capital. In boroughs such as Kensington & Chelsea the typical house price is now a mammoth 38.5 times bigger than the average income, which puts getting a foot on the ladder out of reach of all but the wealthiest buyers.

Such an imbalanced situation creates obvious temptations for policymakers to interfere with the market. However, it is absolutely imperative that they avoid destabilising the housing market for political ends, as was the case with the changes to Stamp Duty last year.”

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Latest Comments

Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

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Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

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Chris
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

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Christian Donovan
Christian Donovan 18 Aug 2017

The write-down on house values, combined with the fall in the GBP saddled the fund?s property portfolio with a 1.4% loss in the second quarter. The shocking amount of $240 million.

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Samantha Goodman
Samantha Goodman 11 Aug 2017

Interesting point of view.

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