With the average price of a home in the UK currently standing at £251,500, prices must drop by an average of 44% across the UK before those who dream of owning a home who are on an average annual UK salary can do so, according to Open Property Group.
The research, based on a mortgage of 3.5 times the average salary, found that those who earn the national average of £32,319.60 for a single person, would be able to afford a mortgage should average house prices price drop to £141,398.
However, the disparity of homeownership becomes even starker when data is analysed across the top 10 most and least affordable homes across the UK.
For the fourth consecutive year, the South is the most expensive place to buy a home and the North the most affordable, according to average salaries and house prices within those cities.
Durham tops the most affordable charts once again, based on a mortgage of 3.5 times the average salary in that city. In fact, the house price has room to drop by 8% per cent and still be affordable, assuming the buyer has a 20% deposit.
But moving from second place in 2020, to first, is the City of Westminster where house prices must drop by 69%, with both Chichester (up three places to two) and Oxford (down from first to third) dropping by 68%, to make homeownership affordable.
Cities in the South have remained the most overpriced places in the country where prices would need to drop by an average of 64%, in comparison to 13% in the North.
Jason Harris-Cohen, Open Property Group Managing Director, comments: “We keep seeing houses in the top 10 move positions, but what is clear is that affordability does not meet average salary brackets. Even with the Stamp Duty Holiday and a fall of house prices in the UK of 7.6% per cent to date, we are still not even close to making homeownership viable for UK residents.
"We are now 12 months into a pandemic and in our third lockdown. The socio-economic situation of how businesses and employees operate will play a factor in how house prices are valued in the future. And as we arrive at the Chancellor’s 14 fiscal budget announcement on March 3rd, we will be faced with a more worrying prospect on what this means for residential property ownership.
"There needs to be due consideration for the three challenges facing the UK: Brexit, Covid Recovery and moving towards Net Zero by 2030, which will impact the residential market. Furthermore, tax reforms on capital gains and a proposition for a Property Tax that will abolish Council Tax and Stamp Duty in place of an annual levy based on the value of a property will definitely impact house prices.”
He concludes: “In my opinion, Brexit is no longer going to affect the property market. At present, there are fewer properties available as a proportion of people are isolating and waiting until lockdown ends.
"Our research also shows that the Stamp duty holiday increased property prices and demand. The number of mortgage approvals for house purchases in the UK increased to 105,000 in November 2020, the highest level since August 2007 which was well above market expectations of 82,500.
"Meanwhile, I would like to see government-backed loans for property buyers to encourage lending and create more liquidity in the market. Lenders are going to be risk-averse and therefore any reluctance to lend will lead to lower mortgage approvals and ultimately fewer transactions.”