New high reached for house price to earnings gap

New high reached for house price to earnings gap

The latest data from Hometrack has highlighted that, in certain parts of the country, the gap between average earnings and house prices has reached record levels.

According to the report, lack of supply and strong demand for housing in London has pushed house prices up by 86% since 2009 meaning the capital now has an eye-watering house price to earnings ratio of 14.2x - the largest on record and more than double the UK ratio of 6.5x.

Cambridge and Oxford also have double digit price to earnings ratios which, in turn, are well ahead of the average over the last 12 years.

Strong house price growth in Bristol in the last 2 years, which has the fastest growing house prices in the index, has pushed the price to earnings ratio to 9.2x earnings.


Three cities have price to earnings ratios that are below the average, namely Glasgow (3.7x), Liverpool (4.4x) and Newcastle 4.8x) where house price growth is starting to pick up off a low base.

Overall the annual rate of city house price inflation is 8.4% as the upward momentum in house price growth holds firm in large regional cities post the outcome of the Brexit vote.

However, the year on year rate of house price growth across London has slowed to its lowest level for three years (9%) and Hometrack expects it to slow further towards low single digit growth in the next 6-12 months as demand weakens in the face of record high unaffordability and in the wake of a raft of fiscal policy changes aimed at investors.

Richard Donnell, Insight Director at Hometrack, said: “The impetus for house price growth is shifting from the affordability constrained cities in southern England to cities in the midlands and the north of England. Regional cities have more attractive affordability levels and house prices have significant potential upside for growth in the near term subject to the outlook for the economy.

In cities where affordability levels are stretched fewer households are able to participate in the market and this reduces levels of turnover and leads to lower levels of house price growth. This process is underway in London where the annual rate of growth is close to its lowest level for 3 years and where the top end of the market is already registering falling prices.

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Latest Comments

MBM Homelets
MBM Homelets 23 Mar 2017

Although this is a very positive step, there is little or no guarantee of the standard of workmanship employed by the tenants. We have had experience of a professionally decorated property being ' painted'...

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ajay
ajay 21 Mar 2017

How is the "robust evidence" looking now?

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NathanG
NathanG 20 Mar 2017

I've been watching the series so far and am completely baffled by the cases that were presented. Though, I don't think that we can protect ourselves from every scam possible - it will just make the scammers...

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Landlady14
Landlady14 01 Mar 2017

You would think so Niraj Shah! My experience only proves that there are varying qualitiers of professional in all aspects of property letting. None of the ones I have dealt with, from letting agents to...

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Mark
Mark 01 Mar 2017

Thanks for this article. Hopefully one day everybody's lifestyle will be eco-sustainable.

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Ben Taylor
Ben Taylor 28 Feb 2017

I was convinced that London was the most expensive!

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Alan Read
Alan Read 28 Feb 2017

Australia are leading the way in this I think. The trouble with Britain is we don't get enough sun to make use of solar power.

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James Powell
James Powell 27 Feb 2017

This is a very good news.

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DanHumphreys
DanHumphreys 27 Feb 2017

It sounds like a good idea. Anything to help the younger generation get a foothold.

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Matt
Matt 20 Feb 2017

Is this fake news?

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Matthew Hollywood
Matthew Hollywood 07 Feb 2017

Matthew Hollywood - Director Mishon Mackay Land & New Homes - Brighton The shortage of New Homes is in part effected by the lack of land sales. Land sales are held back because there is a disparity between...

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CommercialTrust
CommercialTrust 30 Jan 2017

Hi Graham, Would be interesting to see the above figure calculated against an investment via a Lt Company /SPV structure and if the investor found themselves pushed in to the higher tax bracket. Mortgage...

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