Property in the UK has become 50 percent less affordable than it was 14 years ago with buyers now needing six times average income to buy the average home, official figures have revealed.
Official figures today revealed that average house prices have risen from 4.1 average earnings in 2002 to 6.3 times earnings last year.
There are sharp regional differences, with Burnley named as the most affordable place currently to buy a home in England and Wales, while Westminster in London is the least affordable.
It comes despite the Bank of England capping the majority of home loans at 4.5 times earnings.
This development suggests that some borrowers are making up the shortfall by having a large deposit (and so reducing the income multiple required).
For some, that will mean turning to the Bank of Mum and Dad or Government schemes, such as Help to Buy, for assistance. The statistics by the Office for National Statistics found that the average house price in England and Wales last year was £207,500, ranging from just £77,000 in Blaenau Gwent to almost £1.2million in Kensington and Chelsea.
At the same time, the average salary for England and Wales was £22,578 last year, ranging from £16,384 in Blackpool to £37,909 in Westminster.
It compares to 2002 when the average house price was just £110,000 and the average annual salary was £26,600. It follows the latest increase in house prices announced by Halifax, which found the average price of a property in Britain rose 0.1 percent in September to £214,024.
However, economists do not expect the trend to continue and are even suggesting that house prices will fall next year.
Howard Archer, chief UK economist at HIS Global Insight, said: ‘We believe that a slight dip in house prices is likely in 2017, possibly by around 3 per cent.
‘Housing market activity and prices will be increasingly pressurised in 2017 as mounting uncertainty affects the economy and also constrains consumer confidence and willingness to engage in major transactions.’
He added: ‘We also believe that the fundamentals for house buyers will soften with purchasing power softening and unemployment likely rising.’
Jonathan Harris, director of a mortgage broker Anderson Harris, says: ‘With house-price growth continuing to outpace wage growth, it is increasingly difficult to climb the housing ladder.
‘Even though there is a good choice of high loan-to-value mortgages of 90 or 95 percent, even if a borrower can drum up that level of deposit many are then thwarted by the fact that they simply can’t get a big enough mortgage because of caps on the income multiple.
‘For example, someone buying a £300,000 home with a 10 per cent deposit would need to earn circa £60,000 per annum if the lender insists on a maximum income multiple of 4.5 times. If instead, it was possible to borrow 6.3 times income, then a more modest salary of £43,000 would be enough. With property prices continuing to rise, albeit at a slower pace, this situation is only going to worsen in the short-term at least.’
Culled from mail Online