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UK house prices affordability for home buyers is improving at the fastest rate in eight years

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Wed 20 Feb 2019

UK house prices affordability for home buyers is improving at the fastest rate in eight years

Housing affordability in the UK has increased at its fastest rate in eight years, according to new figures, which would usually set the scene for an active spring market — were it not for the uncertain political backdrop.

The average asking price for a home in the UK is now £300,715, the Rightmove house price index for February found.

This is just 0.2 per cent higher than last year’s average, while wages grew by 3.4 per cent over the same period, outstripping asking prices at the fastest rate since 2011.

This is a remarkable contrast to the trend seen for the past two decades, where average wage growth has fallen far behind house price growth, stopping first-time buyers and, increasingly, second steppers and home movers from moving up the housing ladder.

Weak pound tempts international buyers back despite Brexit uncertainty

In 1997 the average home in England and Wales cost 3.55 times average salaries, the most recent figures from the Office for National Statistics show. Twenty years later the house price to income ratio had risen to 7.8 times.

In London, affordability has been even more of an issue. Despite higher average salaries in the capital, house prices were still 13.2 times higher than wages in 2017.

Any sign that this trend is set to decrease will be welcome news to struggling first-time buyers. This group has faced tighter mortgage-lending rules in the wake of the financial crash, including larger deposits and borrowing restricted to 4.5 times earnings.

“Sellers’ subdued pricing is now being outstripped by higher average wage growth, meaning that buyer affordability is on the rise at the fastest rate in nearly eight years,” said Rightmove’s Miles Shipside.

“Buyers are also being given a leg-up by cheap mortgage rates if they can meet lenders’ criteria and lay their hands on a large enough deposit.”

The best UK regions for buyers

Asking prices in London have dropped by 2.1 per cent to £614,000 compared to last year, as sellers attempt to attract stretched and uncertain buyers, held back by political uncertainty.

Price falls have also rippled out to the commuter belt in the South East, where prices fell 1.4 per cent to £395,000; and the East of England, where they fell 0.2 per cent to £347,000.

However, while buyers may be able to take advantage of lower prices and competitive mortgage rates, they face a shortage of options, with fewer people putting their homes on the market, faced with declining prices.

“Prospective buyers in three of the four southern regions are seeing new seller asking prices cheaper than a year ago, indicating that buyers have the upper hand over sellers when it comes to negotiating a price. This has obviously been a factor for some owners in those regions deciding not to come to market,” said Shipside.

In the north of England, prices are rising by two per cent or more in six out of seven regions, with price growth led by Yorkshire and the Humber (3.6%), the North East (3.4%) and the West Midlands (3.2%). In these regions, sellers are keener to list their properties, leading to a greater choice of homes for buyers.