New figures reveal that home hunters need to spend nearly nine times their annual income to purchase a property.
The average cost of a home sold in England is 8.7 times the average annual disposable household income.
Meanwhile, in Wales and Scotland, the multipliers are lower at six and 5.5 respectively, according to the latest figures from the Office for National Statistics.
The average cost of a home sold in England is 8.7 times the average annual disposable household income, according to the Office for National Statistics
This affordability ratio is lower than the peaks in Wales – which was in 2007 – and Scotland in 2008.
However, affordability rates in England are now worse than at any time since records began in 1999.
It has prompted housing experts to describe affordability as a “borderline fantasy” for many people – and they say owning a home is fast becoming a “fantasy”.
‘With lousy inventory levels and a frightening lack of homes being built, affordability ratios were already out of the ordinary for many,’ said Andrew Montlake of Coreco, a mortgage broker.
But with inflation and mortgage rates now so high, affordability is quickly entering the realm of fantasy. Our real estate market is broken because there are no new homes being built and salaries are not rising anywhere near the average home price. In many areas of the country, the UK property market is beginning to resemble a science fiction novel.
Joe Garner, of property developer NewPlace, added: “Affordability has become almost an anachronism.
“In the capital, the affordability crisis is beyond the limit. The insatiable demand from an ever-growing population, coupled with a limited supply of housing and a slowdown in the production line for new building development, will see a continuous upward trajectory of housing prices.
“Wage growth factor is low, rates are rising, inflation and the outlook becomes more bleak.”
The Office for National Statistics said there were significant differences in affordability across Britain
The ONS said the figures were calculated for the year ending March 2021. Since then, property prices have risen further while wage growth has failed to keep pace with inflation.
Timothy Douglas, Industrial SubctiMark, said: “The sales market has so far continued to thrive during turbulent times with homes selling off very quickly. But with potential interest rates on cards soaring and the cost-of-living crisis gripping many people’s finances, the latest data on Housing affordability paints a worrying picture.
“With the 2021 affordability ratios for household income and median home prices worsening to already alarming levels, we know that this year, that disparity is only expected to rise.”
He added that while home price growth may slow by the end of 2022, the supply of homes for purchase will remain out of demand with homebuyers.
“The current availability pressures in the market are a major factor in rising house prices but this is expected to start to slow towards the end of this year,” he said.
However, this will not be enough to smooth out the imbalance in supply and demand, and the current efforts being made will simply not provide the right kind of homes in the right places on Earth that we need to handle the demand.
There are large regional differences in the ONS data, with a median home in the North East costing the equivalent of nearly 12 years worth of income for a low-income household, compared to 40 years in London.
The numbers are based on median incomes, as both income and home prices are skewed with some very high values.
The Office for National Statistics defines disposable income as the total earnings, benefits, pension and other income of a household, less the effect of direct taxes such as income tax, national insurance contributions and council tax.
The average house price in England for the year ending March last year was £275,000 while the median income was £31,800, resulting in an average income of 8.7 yrs.
In Wales the average price was £176,000 and the income £29,400, while in Scotland the price was £166,000 and £30,300 respectively.
The research highlights how incomes will be affected by the pandemic during 2021 and is therefore “more uncertain than unusual”.
Over a longer period, the Office for National Statistics said the house price to earnings in England has risen since 2014 and is now well past its peak in 2008. It has also nearly doubled since 1999.