Housing affordability has improved across much of Britain over the past year but the average home still costs 8.3 times the typical annual salary, new research shows.
Analysis by Yopa, using the latest government data on median earnings and average house prices, found the national house price-to-income ratio has fallen from 8.4 to 8.3 year-on-year.
Affordability improved across six of the 11 British regions and nations, driven largely by stronger wage growth and more measured house price increases.
London recorded the biggest annual improvement, with the ratio falling from 14.5 to 13.9.
REGIONAL VARIATIONS
The South East, East of England, South West and West Midlands also saw reductions, while Wales, the North West, Yorkshire and the Humber, Scotland and the North East experienced slight increases of 0.1. The East Midlands remained unchanged.
Despite the improvement, London remains the least affordable region, with the average home costing 13.9 times local earnings.
The South East ranks second at 10.8, followed by the East of England at 9.9. In contrast, the North East remains the most affordable region, where homes cost 5.6 times average annual salaries.
London dominates the least affordable rankings.
At local authority level, London dominates the least affordable rankings. Kensington and Chelsea tops the list, with an average house price of £1,178,497 equating to 25.2 times the typical salary. City of Westminster ranks second at 19.5, followed by Camden at 17.8. Twelve of the 20 least affordable areas are located in the capital.
Outside London, Elmbridge is the least affordable area, with a ratio of 17.4, while Mole Valley, Chichester, Sevenoaks, Hertsmere, Windsor and Maidenhead, Tandridge and Three Rivers also feature.
Some of the sharpest improvements were also seen in high-value London boroughs. Kensington and Chelsea’s ratio dropped from 30.0 to 25.2, while Camden improved from 21.3 to 17.8 and Westminster from 22.5 to 19.5.
STRONGER EARNINGS GROWTH
Verona Frankish, Chief Executive Officer at Yopa, says: “While it’s encouraging to see affordability improve across many parts of Britain, it’s important to recognise that this has largely been driven by stronger earnings growth rather than any meaningful reduction in house prices, which remain high by historic standards.
“London is a good example of this as, although affordability has improved over the last year, the average home still costs close to 14 times the typical salary, which underlines just how challenging it remains for many buyers.
“That said, any improvement in the balance between house prices and earnings is a step in the right direction and, as this continues, it should help more buyers enter the market and support overall levels of activity.”
