Britain has a problem with high house prices.
First-time buyers and movers require help from the Bank of Mum and Dad, the Government feels the need to bung new home buyers interest-free cash, and a glance at estate agent listings involves a game of ‘how much?’.
Both Halifax and Nationwide’s figures shows homes as having only been more expensive at the peak of the 2000s boom.
But an interesting piece of research has challenged the affordability doom and gloom.
Getting hold of a home has got slightly easier over the past decade says Yorkshire BS, with the house price to earnings ratio shrinking in 54% of areas across Britain.
Buying a home has got more affordable across 54 per cent of Britain over the past decade, says Yorkshire Building Society, which compared average wages to house prices across 32 London boroughs and 324 local authorities in England, Scotland and Wales.
It found that wages have risen by more than house prices over the past ten years, in slightly more than half of the country.
At a national level, affordability has been almost flat – a 0.6 per cent improvement – but while in England it has worsened by 3.3 per cent, it has improved by 18.9 per cent in Scotland and 17.2 per cent in Wales.
In using local wages and local prices, this useful study has produced something that is rare – a comprehensive set of data on affordability that allows us to drill down into individual areas.
The greatest affordability improvement was 42.5 per cent in Inverclyde, in Scotland, where the house price to earnings ratio has fallen to 3.67, while the biggest decline was 61 per cent, in Three Rivers, in Hertfordshire, where a home now costs 15.83 times the average wage.
YBS’ chief economist Andrew McPhillips picked out places such as Edinburgh, Peterborough and Birmingham as having become more affordable, while the usual suspects of London and much of the South have become less so.
In Edinburgh the house price to earnings ratio is down from 8.2 to 7.7, in Peterborough it’s fallen from 7.3 to 7, while in Birmingham it’s down from 6.7 to 6.4.
These are hardly major gains, but it contrasts with Camden’s shift up from 14.1 to 19.9.
Yet, while a North-South divide is clear (and not news), some northern areas have also seen affordability get worse, including Manchester where the house price to earnings ratio has gone from 6.1 to 6.5, and York, where it has gone from 8 to 9.2.
| Local Authority Area | Region | Change in affordability since 2007 | Current house price to earnings ratio | House price to earnings ratio 2007 | Current average house price | Average house price in 2007 |
|---|---|---|---|---|---|---|
| Inverclyde | Scotland | 42.50% | 3.67 | 6.38 | £104,638 | £122,209 |
| North Ayrshire | Scotland | 37.20% | 3.55 | 5.64 | £98,795 | £115,282 |
| West Dunbartonshire | Scotland | 34.90% | 3.44 | 5.29 | £95,074 | £109,128 |
| Burnley | North West | 34.20% | 3.15 | 4.78 | £77,629 | £94,174 |
| Hyndburn | North West | 33.00% | 3.92 | 5.86 | £92,753 | £105,096 |
| Hartlepool | North East | 31.90% | 3.99 | 5.86 | £105,866 | £126,699 |
| East Ayrshire | Scotland | 31.80% | 3.1 | 4.55 | £91,024 | £107,124 |
| Middlesbrough | North East | 31.30% | 4.35 | 6.34 | £111,156 | £126,857 |
| Wyre | North West | 30.50% | 5.76 | 8.28 | £148,358 | £164,295 |
| Sunderland | North East | 30.10% | 4.32 | 6.17 | £111,021 | £126,829 |
| Source: YBS using ONS data for September 2007 to September 2017 | ||||||
| Local Authority Area | Region | Change in affordability since 2007 | Current house price to earnings ratio | House price to earnings ratio 2007 | Current average house price | Average house price in 2007 |
|---|---|---|---|---|---|---|
| Three Rivers | East of England | -61.00% | 15.83 | 9.83 | £519,922 | £332,891 |
| Haringey | London | -60.20% | 17.51 | 10.93 | £554,910 | £318,233 |
| Westminster | London | -55.90% | 24.06 | 15.43 | £1,034,073 | £539,759 |
| Southwark | London | -55.10% | 15.19 | 9.79 | £524,800 | £296,194 |
| Waltham Forest | London | -54.50% | 13.57 | 8.78 | £427,113 | £242,826 |
| Hackney | London | -53.80% | 16.81 | 10.93 | £549,680 | £302,432 |
| Elmbridge | South East | -50.30% | 15.12 | 10.06 | £586,134 | £397,237 |
| Hertsmere | East of England | -49.70% | 15.09 | 10.08 | £467,355 | £293,145 |
| Sevenoaks | South East | -47.80% | 13.3 | 8.99 | £420,296 | £292,325 |
| Camden | London | -44.10% | 19.94 | 13.84 | £809,408 | £485,507 |
| Source: YBS using ONS data for September 2007 to September 2017 | ||||||
The findings are fuel for complaints that the media’s perception of what’s happening to house prices is confined to the M25 area and reader comments saying ‘well they haven’t gone anywhere round here’.
Yet, there is a problem with reading too much into this research.
The reference point is September 2007. That was the peak of a decade-long boom that saw a headlong rush into property driven by reckless lending and cheap credit. Homes should have got more affordable since then.
Over the past decade, banks have been bailed out, rules have been tightened, austerity has been imposed and wages adjusted for inflation have fallen.
What has stopped more homes becoming more affordable is ultra-low interest rates and the UK’s geographical economic imbalance.
The top tens of places where affordability has improved and worsened most substantially reads like a pair of lists of where prosperity is and isn’t.
Take all this into account and that 54 per cent of places have seen homes get more affordable since the 2007 peak, doesn’t mean that Britain has no problem with high house prices.
Have homes near you got more or less affordable
The tool below from Yorkshire BS using its research allows you to see how prices have changed near you. Either use the drop down to search the location or the map to zoom in and click on it. The slider in the top right then allows you to see house prices, wages and the ratio at different points over the past ten years.
If you are using a mobile and cannot use the map, click here.