House price affordability at its worst in a decade as property prices hit 10x the average salary

The latest research by lettings and estate agent, Benham and Reeves, has revealed that current affordability across the UK property market is at its worst in 10 years, with the average house price to income ratio at its highest levels since 2011.

Current House Price to Income Ratio

Benham and Reeves analysed the average house price to income ratio based on average property values and the average net salary over the last 10 years.

The research shows that despite strong wage growth resulting in the average net salary hitting £25,123 in 2020, an average house price of £249,633 places UK house price to income affordability at 9.94 (house price divided by income). This means that house prices are now ten times the average salary and a minimum of one’s year’s salary would be needed for the average deposit!

London remains the least affordable with a score of 15.74, with the South East (12.46) and South West (12.46) also remaining some of the worst regions for property affordability. The North East still ranks as the most affordable region at 6.34, along with Northern Ireland (6.48) and Scotland (6.90).

Highest Level in 10 Years

The UK’s current house price to income ratio of 9.94 is the highest level seen in the last 10 years, having increased from 8.16 in 2011 and exceeding the more recent high of 9.80 seen in 2017.

The only silver lining for those in London and the South East is, that while they are home to the highest affordability ratios in the UK, it has been harder for homebuyers in previous years. In both London and the South East, the house price to income ratio peaked in 2016 at 16.64 and 12.54 respectively.

The East of England, Northern Ireland and North East have also seen the house price to income ratio climb higher in previous years compared to the current level.

What does it mean for FTBs?

With the average first time buyer now paying £209,163 for their first home and earning an annual net salary of £23,643, their house price to income ratio is, of course, higher than that of the average homebuyer at 8.85.

Like the regular market, this is far higher than in previous years, up from 7.35 in 2012* and the second highest ratio seen since then, second only to the ratio of 8.91 seen in 2017.

As per the regular market, London is home to the highest ratio at 14.6, while in the North East it has reached just 5.8 .

Director of Benham and Reeves, Marc von Grundherr, commented:

“The UK’s house price to income ratio reached its highest point in a decade by the end of 2020, no doubt driven by a steep jump in house prices brought about by the market adrenaline shot of a stamp duty holiday.

Although some regions still remain below previous peaks, this new national high demonstrates the huge financial cost of climbing the property ladder in the UK, a cost that grows largest still for those attempting to take their first step.

Unfortunately, even with stronger wage growth in recent years, earnings have failed to keep pace with house prices and so it’s very likely we could see this issue of affordability grow larger before it starts to reduce. “

Tables show the average house price to income ratio based on the average house price in each area divided by the average net annual income. Highlighted cell indicates the highest ratio since 2011/2012.

Data on average first-time buyer house price sourced from the Gov.uk/Land Registry UK House Price Index. Data on average first-time buyer earnings sourced from the Office for National Statistics.
*House price vs net income ratio (affordability ratio) since 2011*
Location	AveHP vs income 2011	AveHP vs income 2012	AveHP vs income 2013	AveHP vs income 2014	AveHP vs income 2015	AveHP vs income 2016	AveHP vs income 2017	AveHP vs income 2018	AveHP vs income 2019	AveHP vs income 2020
United Kingdom	8.16	8.15	8.38	8.90	9.39	9.61	9.80	9.71	9.50	9.94
*England*	*8.35*	*8.43*	*8.71*	*9.27*	*9.91*	*10.19*	*10.36*	*10.24*	*10.00*	*10.43*
London	10.20	11.29	12.70	14.53	16.22	16.64	15.86	15.29	15.17	15.74
South East	9.47	9.54	10.07	10.85	12.02	12.54	12.71	12.39	11.90	12.46
South West	10.18	9.90	10.25	10.68	11.25	11.50	11.92	11.86	11.49	12.27
East of England	8.92	8.97	9.34	9.92	10.92	11.60	11.96	11.59	11.45	11.57
West Midlands region	7.86	7.90	7.74	8.15	8.48	8.65	8.99	9.12	8.76	9.05
East Midlands	7.41	7.21	7.38	7.75	8.19	8.31	8.71	8.84	8.63	8.94
Wales	7.28	7.13	6.96	7.29	7.33	7.36	7.61	7.84	7.79	8.24
Yorkshire and the Humber	7.17	7.02	7.02	7.30	7.49	7.68	7.72	7.70	7.57	7.95
North West	6.95	6.80	6.74	6.94	7.09	7.23	7.55	7.51	7.33	7.80
Scotland	6.61	6.21	6.25	6.52	6.46	6.37	6.63	6.59	6.46	6.90
Northern Ireland	6.56	5.73	5.78	6.03	6.18	6.29	6.40	6.57	6.56	6.48
North East	6.51	6.33	6.20	6.26	6.26	6.32	6.36	6.15	6.01	6.34

Location	AveHP vs income 2012	AveHP vs income 2013	AveHP vs income 2014	AveHP vs income 2015	AveHP vs income 2016	AveHP vs income 2017	AveHP vs income 2018	AveHP vs income 2019	AveHP vs income 2020
Great Britain	7.35	7.61	8.13	8.56	8.74	8.91	8.78	8.59	8.85
*England*	*7.62*	7.92	8.46	9.05	9.28	9.43	9.26	9.05	9.29
East Midlands	6.55	6.74	7.09	7.48	7.56	7.93	8.01	7.83	7.98
East of England	8.06	8.44	8.99	9.90	10.49	10.81	10.43	10.29	10.22
London	10.65	12.08	13.83	15.45	15.81	15.07	14.45	14.32	14.62
North East	5.89	5.79	5.84	5.84	5.87	5.91	5.69	5.57	5.76
North West	6.18	6.15	6.35	6.49	6.60	6.89	6.82	6.66	6.98
Scotland	5.46	5.47	5.69	5.66	5.58	5.82	5.78	5.63	5.94
South East	8.26	8.75	9.45	10.47	10.91	11.06	10.72	10.29	10.57
South West	8.79	9.13	9.54	10.06	10.26	10.64	10.52	10.21	10.72
Wales	6.66	6.52	6.84	6.86	6.87	7.10	7.27	7.25	7.57
West Midlands region	7.09	6.97	7.35	7.64	7.80	8.11	8.19	7.89	8.01
Yorkshire and the Humber	6.48	6.52	6.79	6.97	7.12	7.16	7.11	7.00	7.24
*Data for first-time buyer house prices only available at Great Britain level and not UK. Data also only available from 2012.
Average first-time buyer wage based on an average of earnings for 22-29-year-olds and 30-39-year-olds.