Ryan Fowler

The Intermediary.

  • 04/07/2023

Housing affordability hits record low as house prices soar

A recent study by property purchasing specialist House Buyer Bureau reveals that housing affordability in the UK is at its worst in decades.

The average house price has now reached 8.8 times the average earnings, more than twice the income-to-house-price ratio of the 1970s.

House Buyer Bureau analysed the change in the value of a home and average earnings every decade since the 1970s to ascertain the impact on housing affordability.

During the 1970s, the average house price was just £9,277, equivalent to £68,493 in today’s money, adjusting for inflation.

In contrast, the average income was considerably lower, at £2,265 or £16,723 after inflation adjustment. The result was a relatively lower income to house price ratio of 4.1.

The affordability ratio slightly increased to 4.2 times in the 1980s but dropped to 4 times income in the 1990s, making it the most affordable decade for property buying since the 1970s.

However, the trend reversed in the following decades, with the income to house price ratio consistently rising.

In the first decade of the millennium, house prices required 6.4 times the income, and this increased to 7.1 in the subsequent decade.

As of now, the average house price has reached £286,489, a staggering 318% increase from the average of the 70s.

Although average earnings have also risen to £32,432, this represents a less significant increase of 94%. The current income to house price ratio of 8.8 indicates a more than double increase since the 1970s.

Chris Hodgkinson, managing director of House Buyer Bureau, said: “House prices have skyrocketed over the last two decades, while earnings have failed to keep pace. Today’s homebuyers require over double the income to afford a home compared to those in the 70s.

“The situation is further compounded by recent high inflation levels and the cost of living crisis, forcing homebuyers to pay exorbitant amounts when securing a mortgage due to the current interest rate of 5%.”