Property in: LONDON

Housing Affordability In London At Records Lows

by Kos
3 minutes

The recent data by Halifax suggests that housing affordability in London is at its lowest level as an average home costs nearly 10 times the average income.

On average, a home in London costs 10 times the income of a typical local. Data by Halifax suggests the surging property prices as the main driver of shrinking affordability in the capital.

Key Data From Halifax Research

Based on the Halifax House Price Index, experts revealed average house prices in the UK spiked 16% throughout the pandemic. In turn, average income increased by just 2.7% over the same time.

In Q1 2022, a typical buyer purchased an average home in the UK for £279k, while their annual income reached £39k. As a result, the property price to income ratio stood at 7.1, the least affordable number since such records began.

Property Affordability In London in 2022

As for the London property market, an average home here costs some £534k, while the house-to-income ratio is just shy of 10.0. It is the highest level of any UK region or nation.

The index stood at 9.0 just before the pandemic hit and only 6.8 fifteen years ago. And in April 2022, we saw the property prices spike by 7.9% year-on-year (YoY). However, monthly figures are less dramatic as house prices increased by just 1% compared to March this year.

The market data lags some two months, meaning that we are yet to see the wider impact of the economic uncertainty, rising interest rates, and costs of living crisis.

Current Property Setting For First-Timers

The FTB market is likewise going through a turbulent phase. In 2021, the number of first-time property buyers spiked 35% and reached 409,370, all-time high levels.

An average house price to income index for FTBs sits at 5.6, compared to 8.5 for home-movers. However, new buyers also faced challenging settings because of the rapidly growing home values throughout the pandemic. Halifax says first-timers are still trying to find a way of getting onto the property ladder by joint mortgage applications and looking for other sources of funds.

Real Estate Specialists Comment

Halifax confirms significant changes in the property market since the pandemic hit. Soaring house prices and lagging income growth have combined and stretched the typical levels of property affordability.

But we also saw the demand staying strong over the past two years, with both home-movers and FTBs taking steps on the property ladder. The experts also strongly recommend taking a sensible approach when deciding to take a mortgage in such challenging settings. And lenders must carefully check affordability even if interest rates will rise more in future.

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