Housing affordability worsened significantly across England and Wales last year, with property prices rising at a faster rate than wages, according to the latest figures from the Office of National Statistics.
On average a full-time worker can expect to pay around 7.8 times their gross annual earnings to purchase a property. This is a significant increase of 2.4 per cent on the position the previous year.
The situation is particularly acute when looking at new-build properties and flats, where affordability is declining at a far quicker rate.
According to the ONS a full-time employee in England and Wales would typically expect to spend 9.7 times their earnings to purchase a new-build home; this compares to 7.6 times earnings for an existing property.
Mortgage broker Private Finance’s director Shaun Church says this raises questions about whether Government schemes, such as Help to Buy, were having a detrimental effect on affordability.
He says: “With new build affordability worsening at a much faster rate than other property types questions must be asked about whether schemes with an exclusive focus on new builds are over-inflating price,s and will distort the market even further in the long-term.”
Latest figures from the Ministry of Housing, Communities and Local Government show that the number of purchasers using these Help to Buy Loans has risen over the last year. Many within the lending industry are calling for clarity on what will replace this scheme when it is due to end in 2021.
Church says these affordability figures “paint a worrying picture for those hoping to make their first step onto the housing ladder”.
“Traditional first-time buyer homes – flats, maisonettes and terraced houses – have witnessed the largest negative change in housing affordability.
“As demand for ‘starter homes’ has soared, construction has slowed, pushing the prices far beyond the reach of many hopeful homeowners.”
The ONS show that housing affordability has worsened significantly in 69 local authorities in England and Wales over the past five years, with over three quarters of these being in London, the South East and the East of England.
London has seen the biggest decline in affordability over this period.
Copeland in the North West of England was the most affordable local authority in England and Wales last year, with house prices being 2.7 times average annual earnings. Not surprisingly Kensington and Chelsea in London was the least affordable local authority, with the average property priced at 40.7 times average earnings.
However, while affordability worsened considerably in England last year, it has remained level across Wales as a whole.
