Property in the UK has become 50 per cent 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.
Revealed: The 10 most affordable places to buy a property have been revealed Merthyr Tydfil in Wales has been named as one of the most affordable places to buy a home
MOST AFFORDABLE 10 LOCAL AUTHORITIES FOR HOME OWNERSHIP
Local authority name Ratio of average house price to average salary Burnley 3.86 Blaenau Gwent 3.98 Copeland 4.11 Pendle 4.25 Merthyr Tydfil 4.47 Hyndburn 4.68 Rhondda Cynon Taf 5.05 County Durham 5.12 Neath Port Talbot 5.19 Stoke-on-Trent 5.2 Source: ONS
It comes despite the Bank of England capping the majority of home loans at 4.5 times earnings.
It 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.
Richmond upon Thames has been officially named as one of the least affordable places to buy a home Elmbridge has been identified as most of the most unaffordable places to purchase a home
TEN LEAST AFFORDABLE LOCAL AUTHORITIES FOR HOME OWNERSHIP
Local authority name Ratio of average house price to average salary Westminster 23.13 Camden 21.15 Hammersmith and Fulham 21.09 Islington 17.63 Mole Valley 17.26 Barnet 17.25 Hackney 17.01 Elmbridge 16.71 Richmond upon Thames 16.69 Brent 16.65 Source: ONS
It follows the latest increase in house prices announced by Halifax, which found the average price of a property in Britain rose 0.1 per cent 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 pressurized 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 mortgage broker Anderson Harris, says: ‘With house-price growth continuing to outpace wage growth, it is increasingly difficult to climb onto the housing ladder.
‘Even though there is a good choice of high loan-to-value mortgages of 90 or 95 per cent, 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.’