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House prices: You need 40 years of income to buy a property in London

House prices in London are the highest in the country
House prices: The ONS looked at distributions of house prices and household income, which indicated how affordable, on average, a range of homes were across Great Britain. Photo: Matt Crossick/Empics

People on a low income looking to buy property in London need as much as 40 years worth of earnings, new data has shown.

According to the Office for National Statistics (ONS) on Thursday, in the year to the end of March, the average home sold in England — at £275,000 ($333,500) — cost the equivalent of 8.7 times the average annual disposable household income of £31,800.

This was 6.0 times as much in Wales, with £176,000 as the median house price and £29,400 for average income, while the ratio in Scotland was 5.5 as house prices averaged at £166,000 compared to a £30,300 salary.

The ONS looked at distributions of house prices and household income, which indicated how affordable, on average, a range of homes were across Great Britain.

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While purchase affordability ratios for the average home are below their peaks in Wales (2007) and Scotland (2008), affordability ratios in England are worse than at any point since the series began in 1999, the ONS said.

Across the regions, an average-priced home in the North East cost the equivalent of almost 12 years of income for a low-income household, compared to 40 years in London.

In addition to this, last year income estimates were already affected by the coronavirus pandemic.

“In recent times, a pandemic-induced slowdown in housebuilding and wages that haven’t kept pace with house prices growth, fuelled by supply and demand mismatch, has exacerbated affordability pressures,” Myron Jobson, senior personal finance analyst at Interactive Investor, said.

“The decline in housing affordability depicts a property market that has become increasingly difficult for first time buyers to access.

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He added: “Soaring house prices, rising mortgage rates and the cost of living squeeze has forced many to give up their dream of homeownership — at least for the time being. The Bank of Mum and Dad is also facing its own cost of living challenges and can’t be relied on to provide much needed financial support."

Industry experts have raised concerns that many are borrowing beyond their means as house prices continue to rise and pockets are squeezed amid a sharp cost of living crisis.

UK house prices rose by 12.8% in May, up from 11.9% the month before, fuelling Britain’s property boom.

The average UK house price came in at £283,000 during the month, which was £32,000 higher than the same time last year.

Average house prices increased over the year in England to £302,000 (13.1%), in Wales to £212,000 (14.4%), in Scotland to £188,000 (11.2%) and in Northern Ireland to £165,000 (10.4%).

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Meanwhile, rents continued to grow across the country. Private rental prices paid by tenants in the UK rose by 3% in the 12 months to June, up from 2.8% in the 12 months to May 2022, while private rental prices grew by 2.9% in England, 1.9% in Wales and 3.5% in Scotland over the year.

“The government has a great deal to answer for when it comes to the plight of today’s homebuyer and the blame can’t be solely placed at the door of one mop headed buffoon,” James Forrester, managing director of Barrows and Forrester, said.

“For years, they’ve insisted on fuelling buyer demand while failing to address the severe reality of the housing crisis by actually building more homes and this has pushed house prices to record highs.

“As a result, the initial cost of a mortgage deposit has also spiralled and now acts as a huge financial barrier, preventing many from realising their dream of homeownership.”

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