Growth in house prices outpaces rise in wages

house prices outpaces rise in wagesWould-be homeowners in the UK are struggling to keep pace with the housing market, as a recent study has revealed that the last decade has seen property prices rise at three times the rate of wage increases.

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House prices have risen from an average of £127,769 in 2001 to a figure of £236,518 today – a staggering increase of 94%.

The growth in wages has been far more sluggish, with salaries increasing by just 29% over the same period, from £16,557 to £21,330.

“These shocking figures show that is it getting increasingly harder for millions of people to buy a home of their own in the current climate,” said David Orr chief executive of the National Housing Federation, which carried out the research.

“With the gap between income and house prices growing ever wider, people can often feel like they have to win the lottery to be able to buy in their area. Unless we start building more homes people can truly afford to match the demand, this will only get worse.”

The ratio between the average house price and average salary in England and Wales has risen from 7:4 in 2001 to 11:1 in 2011.

Some regions in England have experienced an even wider gulf between wage and property price growth over the last decade.

Copeland, in the Lake District, has seen property prices rise by 145% to £129,862 while income has grown by just 5% to £21,117.

In 2001 the average deposit for a typical 90% LTV mortgage was £12,777 or around nine months of average salary. Nowadays, the deposit required for a 75% LTV mortgage is £59,129 – almost three years of an average salary.

4 thoughts on “Growth in house prices outpaces rise in wages

  1. As I suspect its a blatent PR from the National Housing Federation who want to build a few more houses.

    I`m not sure what research is needed to actually figure that out? Its common knowledge.

    The housing market pricing is not following demand. There are more than ever unsold properties. The current situation does not meet supply and demand economics. Prices would be a lot lower.

    The slump is totally due to over inflated prices to earnings ratios. Wages will not increase, so either prices have to fall or the status quo of vendors holding out for 2008 prices remains.

    We could build 5 million new homes but then a price drop to realign earnings will leave many people in negative equity especially if purchased post 2006. But we know it wont happen.

    We also forget about the 16-21 age group who seem to be isolated from employment opportunities and forced into Uni or college as alternative to unemployment. By time these people have saved or earned enough wages to buy a house they will be in their 30`s. Most my freinds had their own homes at 18 in the 80`s. Ratios were about 3+1 for affordability and interest rates 8%.

    I wont miss the opportunity of slating the cheap suited, BMW driving, Mr Ten percenters, Estate Agents, in my appraisal of who is to blame in the property game. Those gormless greedy people driving up prices for commissions constantly and helping to fix illegal mortgages in order to make the sale.

    I know who, where and when so I`m happy to spill the beans!

  2. one day the property market will wake up to the current climate. This has been years in the making and as a first time buyer I for one am holding out for the market to realise that even current prices are out of touch. I’m sure most first time buyers are holding out as it’s near impossible to raise deposits and even if they can they are seeing that demand is low and therefore waiting for the prices to fall further. the insane desperation for property in the last decade is over with rental prices being more attractive than a morgage.

  3. Well put Mr Longley, I’m sick of whinging agents “state of the market” excusses. They acted like kids in a sweet shop making up unaffordable prices, then seemed surprised it’s all colapsed around them. It’s about time a competent Reg Auth took charge of agents and ensured they are properly trained and qualified unlike the current monkey’s doing the job today.
    Don’t forget the bank’s part in this mess also, giving out our money which they should have known would be defaulted on!

    • Of course Colin and how do we know if offers on properties are genuine, they never give out offer information or can we see the offers in writing. They use competing offers to drive up prices through mis information.

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