Recent research shows London homes are slightly more affordable but still mainly accessible to the top earners in the city
London: So, it turns out that homes in London are a bit more affordable now. After a year of not much change in house prices, the gap between what people earn and what homes cost has shrunk a little. But don’t get too excited—it’s still the priciest place in the UK.
According to new research from Nationwide, the average house price in London is still about eight times what people earn. In comparison, homes in Scotland are just three times the average earnings. Crazy, right?
If you want to buy a home in London, you pretty much need to be in the top 10% of earners. Meanwhile, in Scotland, even someone earning less can still afford a place. They figured this out by looking at what first-time buyers typically pay and how much they’d need to earn to get a mortgage.
There’s some good news for Londoners, though. The report highlights that there’s a big difference in affordability across the city. For instance, in Kensington & Chelsea, homes cost about 13.6 times the average earnings, while in Enfield, it’s only 6.2 times. Still high, but better!
Commuter areas around London are a bit easier on the wallet, but that’s often because people earn more there, not because house prices are lower. Take Surrey Heath, for example; it has a house price to earnings ratio of 4.8.
In Essex, Tendring is the most affordable spot in the South East, with a ratio of five. So, if you’re looking for a bargain, that might be the place to check out.
Andrew Harvey from Nationwide mentioned that while there’s been a slight improvement in housing affordability, it’s still tough compared to historical standards. A typical buyer now spends about 36% of their take-home pay on mortgage payments, which is higher than the long-term average.
Even though wages have gone up a bit faster than house prices this year, the overall situation is still pretty grim. House prices are about five times the average salary, which is way above the long-term average of 3.9 times.
Saving for a deposit is still a huge hurdle for many people, especially with rents skyrocketing and the cost of living being what it is. It’s no wonder that a lot of first-time buyers are getting help from family and friends—about 40% rely on gifts or loans to raise a deposit.
Despite all these challenges, house prices actually went up by 4.7% this year, and mortgage lending is back to where it was in 2019, even though rates are now three times higher. First-time buyers made up over half of all mortgages, which is more than before the pandemic.
Marc von Grundherr from Benham and Reeves said that your job and where you work are still the biggest factors in buying a home. Even though affordability is a big issue, it hasn’t stopped over a million people from buying homes in the past year.
Verona Frankish from Yopa added that while existing buyers are moving, first-time buyers are really struggling. Transactions for them have dropped by 43% compared to last year. She emphasized that the government needs to step up and build more homes to really tackle the affordability crisis.
