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Renting set to boom as buying is even less affordable

The average house prices in England was £290,000 last year, some 8.3 times average annual earnings.

This was actually down from 8.5 times from the previous 12 months, according to the Office for National Statistics.  

An ONS spokesperson says: “These ratios are similar to 2022, and represent a return to the pre-pandemic trend after a large increase between 2020 and 2021,” says the government’s data body.  


“The sharp price increases in 2021 coincided with increases in the volume of sales and changes in stamp duty land tax and land transaction tax. Therefore, the ratios in 2022 and 2023 are a return to the long-term trend, following the sharp increase in 2021.”  

However, the figure remains well above the threshold the ONS uses of five years of income “as a broad indicator of affordability” for average home.  

In Wales, an average house sold for £196,500 last year, easing to 6.1 times average annual earnings from 6.4 times over the same period. - again, well above the affordability benchmark.

The least affordable area of England and Wales is, perhaps unsurprisingly, Kensington and Chelsea, where property costs 34.2 times earnings.

Sarah Coles, head of personal finance, Hargreaves Lansdown, says: “Houses are frankly unaffordable at the moment. The pandemic property boom ratcheted up the cost of property, and while wages are growing faster at the moment, they fell so far behind house prices in recent years that there’s acres of ground yet to be made up. It means buyers in England are having to find an astonishing 8.3 times their income to buy a home.

“While earnings have doubled since 1997, house prices are four and a half times higher.

“For first time buyers, life is even tougher. For someone on the National Living Wage, working 37.5 hours a week and buying the average home, they would need to spend 14 times their annual earnings.

“When a household spends 25% of its after-tax income on the mortgage, it’s considered to be at risk of falling behind on payments. 

“[Hargreaves Lansdown found] that, by the end of 2024, one in four people with a mortgage will be in this position. Meanwhile, 390,000 will have an unaffordable mortgage and unsustainable spending, and 34,000 will have all these problems – and not enough savings to protect them.”

Coles says buyers are increasingly stretching their mortgages over longer periods to make the monthly payments more affordable. 

The average first-time buyer mortgage has now stretched to 32 years. 

She continues: “By paying the debt for longer, it means paying more interest, so the mortgage is more expensive overall. You also need to consider the fact you will be paying the debt off later in life. 

“If you had planned to use your 50s and 60s to patch any holes in your retirement finances, it’s worth bearing in mind that this will be much harder if you’re still carrying a mortgage at the time.

“If you’re planning to buy, the best protection from being overstretched is to build as big a deposit as you can manage.”

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    All so true, this is exactly why my last BTL was sold, and the proceeds split between my 2 children after CGT was paid. I had intended to sell up anyway, but that one was going to be delayed a bit, either way my tenants had to find somewhere else to live. What a mess this country is 🆘 . What about the young who don’t have parents like my wife and I 🤷‍♂️. I certainly didn’t, mine were total wasters, my children would be up the creek if they had my parents 🫣🫣


    Honest post Simon, sounds like you’ve pushed hard and done ok. Well done.


    I was lucky and had good hard working parents but born in the first quarter of the last century with no chance of a decent education, going out to work at 14.

    My generation and my children benefitted from grant assisted University education and became middle class multiple property owners.

    While my grandchildren will get a decent inheritance, coming from middle class homes will ban them from the "free" Scottish University education reserved for the poorest Scottish kids and funded by hordes of rich Chinese students taking up the places previously available for middle class Scots - but that doesn't matter as the middle class won't ever vote SNP anyway.

    Peter Why Do I Bother

    With you there Simon, could not wait to get out and earn my own brass.

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    I'm not sure the comparison is a fair one today. Comparing affordability as a function of income does not take into account that a high percentage of buyers these days are working couples with double incomes. Sure they are more expensive as a function of one income, but you can half that 8.3 to 4.15 times the average income for a couple earning the average UK wage.

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    This comparison in not a reasonable one.

    Comparing affordability simply as a house prices as a function of income does not take into consideration finance repayment costs. to have a proper comparison you need to consider interest rate. In 1989 when I purchased my first house the BoE base rate was 14.88% (think about that compared to today when everyone is complaining it too high at 5.25%). In 1989 I purchased a 2 bed terrace for £45,000 given interest rates of 14.88% that makes interest only of £6,696 or £558 per month on £45k. I could not afford to purchase the house on my own to live in, so I purchased it jointly with a friend and rented it out as a holiday let, with our eye on capital appreciation.

    I sold the house in 2006 for £135,000 however the buyers by then had the benefit of a BoE base rate of 5% so the interest costs would have been £6750 per year or £562 per month £135k.

    So certainly houses are much more expensive today as a % of typical income, but you need to look at the monthly repayments costs compared to peoples typical income to get a real affordability measure / indicator.


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