Buying a house is becoming more ‘affordable’ as wages outpace prices

Buying a home is become more affordable relative to income according to latest research from the Halifax.

The research, using data from the Halifax house price index, found UK house prices increased by 3.8 per cent compared with a year ago, reaching an average of £292,508. Annual wages for full-time workers are up 5 per cent to an average of £44,667, over the same period.

This means wage growth outpaced moderate house price inflation, putting the house price to income ratio at 6.55 – down from 6.62 last year.

Halifax, the UK’s biggest mortgage lender, said the house price to earnings ratio had been steadily going down since hitting a record high of 7.24 in the summer of 2022.

Amanda Bryden of Halifax Mortgages, said: “Housing affordability has improved over the past year, thanks to stabilising property prices, strong wage growth, and easing interest rates.

“That’s great news for first-time buyers and existing homeowners looking to remortgage or move up the property ladder.”

She said progress had been slow. “Buying a property remains a ­significant challenge for many, with prices still near record highs and interest rates likely to stay higher than we’ve been used to over the past decade.”

The affordablility trend was not UK-wide with housing in some parts of the UK becoming less affordable.
Northern Ireland had seen the biggest increase in house price-to-earnings ratio from 4.88 last year to 5.09 fuelled by a 10 per cent rise in house prices.

Kingston upon Hull in East Yorkshire was the most affordable area of the UK, with a house price to earnings ratio of 3.15, followed by Burnley and Blackpool in the North West, with ratios of 3.20 and 3.34 respectively.

Elmbridge in Surrey is the least affordable local area with a house price to earnings ratio of 17.54. St Albans in Hertfordshire is in second place with a ratio of 13.96.

Karen Noye, mortgage expert at Quilter, said that while affordability has improved slightly over the past year “progress remains fragile”.

She said wage growth may falter in the face of the Government’s proposed budget changes.
“Without robust wage increases, any affordability gains could quickly evaporate, particularly given the persistent supply and demand issues plaguing the UK housing market.”

“With too few homes available to meet demand, house prices remain likely to continue their upward trajectory even as wage growth stagnates, further exacerbating affordability challenges for first-time buyers.

“The government’s target of building 300,000 homes a year offers some hope of stabilising prices if achieved, but that ambition remains far from reality. For now, the combination of rising prices, modest wage growth, and recent market distortions, such as the stamp duty rush, continues to weigh heavily on prospective buyers. Without significant policy intervention, the affordability crisis will persist, leaving many aspiring homeowners locked out of the market.”

Britain’s “wealth boom” has started to unwind and the average wealth gap between households in their 30s and those in their 60s has shrunk by £86,000 over the past five years, according to the Resolution Foundation think tank.