Number of homes ‘earning more than their owners’ falls

Written by Oliver Wade
23/04/2019

The gulf between earnings and property price inflation has shrunk considerably across the UK in recent years, new research from Halifax has revealed.

Previously, British homeowners found themselves ‘earning’ more from the annual increase in the value of their property than from their take-home pay. However, that trend is now shifting as a result of weaker house price inflation and stronger wage growth.

The average increase in house prices over the last two years has surpassed post-tax earnings in fewer than one in ten (8 per cent) local authority districts (LADs). In comparison, this percentage was almost one in five (18 per cent) in 2017 and nearly a third (31 per cent) in 2016.

The London borough of Richmond-upon-Thames is one of the few locations where houses are earning more, producing the largest gap between property inflation and wages at £55,482, or the equivalent of £2,312 per month. This equates to more than 80 per cent of the average deposit on UK house purchases, but is still quite a way off the London average of £137,638.

The next biggest gap was found in Winchester, home to much of the South Downs National Park, in the South East of England (£45,016). Wandsworth was the only other London borough to make the top 10, in stark contrast to a year ago, when nine of the top 10 LADs were in the capital.

Commenting on the statistics, Halifax managing director Russell Galley said: “While the slowdown in house price growth may not be welcomed by homeowners, the narrowing gap between prices and wages should improve mortgage affordability for all, meaning that larger house, home extension or even first property are all more attainable.

“Although every region of the UK saw earnings exceed price growth overall, there continue to be significant variations across the country. The majority of areas where house price inflation outpaced owners’ take-home pay are still to be found in London and the South East.”

Furthermore, despite 28 individual local authorities recording average house price increases in excess of total average pay over the last two years, at a regional level, the picture was more consistent.

All 12 regions of the UK saw average earnings exceed house price inflation, from £19,649 in London up to £35,250 in Scotland.

When reflecting over the last five years, London was the only region to see average house prices increase by more than total average pay (£23,817). Over the same period, the LAD with the largest margin was Three Rivers in East England (£88,281).

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