Are UK Homes Becoming More Affordable?

According to the latest, Asking Price Index report from Home.co.uk, UK Property has become "around 15% more affordable since asking prices peaked in 2004". Asking prices have fallen steadily for over two years, thereby reducing the price of the average house by around 5%. Couple that with an increase in UK average earnings of around 10%, over the same period, and the 'average property' is 15% more affordable for the 'average buyer.'

So houses are now cheap? Not exactly, the most affordable region, Yorkshire and Humberside, still has a price to earnings ratio of 8x average salary. Houses have gradually become easier on the pocket but they are far from cheap.

"Current house prices are still expensive, however, our research has revealed that the tide is slowly turning in favour of the many thousands of potential first-time buyers who have been priced out following the extraordinary house price inflation that drove asking prices to new record levels in 2004." Commented Doug Shephard, Business Development Director at Home.co.uk.

A trend toward greater market stability?

Increasing affordability is good news for sellers and aspirant owner-occupiers. While this trend toward improved affordability continues, the risk of a property crash is steadily diminishing. By offering small discounts sellers have kept the market moving and, perhaps more importantly, buyers face a reduced risk of crash-induced negative equity. The rub for buy-to-let investors, in the current situation, is that they are less likely to make a profit in the near future. Moreover, high house prices means low rental yields and many new landlords may simply be subsidising their tenants.

Affordability is closely examined in the report from Home.co.uk and reveals significant regional variation and a few surprises. Who would have thought that, of the ten regions, Greater London, with an asking price to earnings ratio of 8.5, was the third most affordable region to buy a house? The hefty salary cheques pulled in by London workers appear to compensate adequately for the higher property prices in the capital. For comparison, the overall home affordability ratio for England and Wales currently stands at 10.3.

The region with the least affordable property is the South West. Property on the market in this region has a staggering price earnings ratio of 12! Yes, the most common asking price is twelve times the average salary.

Those that inhabit the much sought after holiday home destinations in the South West will be well aware of how they have been priced out of their own towns by more wealthy buyers of second homes and holiday-lets. These buyers are often the beneficiaries of the higher value job markets in London and overseas. A steady influx of such buyers has meant that many, once vibrant, picture postcard communities are mere ghost towns in the off-season.

However, it is not just the South West that is suffering higher house prices than the locals can afford. A similar situation is to be found in both the South East and East Anglia, with each region registering home affordability ratios of 11+. House prices in these regions have been inflated by both second-home buyers and commuters working in London.

Greater London asking prices rose by 1.1% this month, helping to shore up the mix-adjusted average for England and Wales, which increased by just 0.2% but was down 0.1% over Q3. The best performing region for Q3 was Wales with a rise of 2.1%, whilst the worst performer, the East Midlands, fell by 3.0%. Over the last year, asking prices in England and Wales fell by 1.0% (3.4% below the CPI and 5.3% below the AEI) thereby continuing the two year trend toward greater overall affordability.

A current trend toward more stable and sustainable market conditions there may be, but the risk of a downturn, albeit diminished, is still present. The possibility of further increases in the cost of borrowing, the consequences of irresponsible lending practices and a potential mass exodus of buy-to-let investors are all dark clouds on the property horizon.

The Home.co.uk Asking Price Index reports may be viewed at https://www.home.co.uk/asking_price_index/

Notes for Editors

Over the last 28 years, Home.co.uk has become established as a dynamic, innovative and ethical service. By providing the UK's most comprehensive Property Search and Estate Agents directory coupled with detailed House Price analysis, Home.co.uk delivers the real power of the Internet to inform and empower estate agents, homebuyers, renters, landlords and sellers in across the UK.

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