That buying a property – any property – in the UK is increasingly the preserve of the rich will come as no surprise to low-income households.
But official data shows that the middle classes are increasingly squeezed, with only the cheapest 10% of houses now affordable (no more than five times a household’s income according to the Office for National Statistics) to middle-income England.
Data released this week confirms a trend that has been in the pipeline for years. It has been two decades since a household with the median income could afford a mid-range-price house in England.
But, except in the years in and around the 2008 housing bubble when prices spiked, the median household could still afford to buy a house in the cheapest 20% of the market.
That changed in 2021, when they could only afford the cheapest 10% of properties. The 2022 data released this week confirms it.
So, how did we get here?
In 1999, a median house in England cost 4.4 times the median income, according to the ONS. The median is the midway point in any distribution of numbers (in this case, the income or house price at which half fall below and half fall above). The ONS uses median because high house prices or incomes could skew the average upwards.
The late 2000s saw a house-price boom. But although house prices recovered from the subsequent crash, wages did not keep up after the global financial crisis. The latest figures for 2022 show that the ratio had almost doubled to 8.4 times income in 2022.
The national figures also don’t tell the full story. Southern England has consistently been the least affordable part of the country to buy in – last year only the top 10% could afford the average home in the south-east. Buying in London is even worse, with the average home now beyond the official measure of affordability even to households whose income is in the top 10%.
However, in recent years the area of unaffordable house prices has expanded beyond the south. The north-east remains the most affordable region to buy a house in England – but the median house cost 5.3 times the median household income last year.
While unaffordability has long been a problem in England, it is a more recent trend in the rest of the UK.
A median-price home in Wales became unaffordable to the typical household in 2004: in 2022 that ratio stood at 6.4 times the median household income. The equivalent Scottish household stopped being able to afford a mid-priced home in 2006: in 2022 it was 5.3 times income. Northern Ireland became unaffordable again in 2017 after a brief stint of affordability, reaching 5.1 last year.
These statistics have implications for those hoping to get on the housing ladder. Typically, mortgage lenders will use a ratio of 4-4.5 times each person’s salary. Coupled with the recent rise in the interest rate, getting a mortgage is now out of reach for many younger people. Banks have been forced to stretch their salary multiples – last year Nationwide allowed first-time buyers to borrow up to 5.5 times their income if they put down a 5% deposit. In recent years some mortgage products have been offered at seven times income.
It’s little surprise that as a result, the number of adults living in their family home in England and Wales has risen by 700,000 since 2011 – with about 30% of 25- to 29-year-olds now living with their parents. The trend has meant that those who move out are also far more likely to be paying their salaries to landlords; the number of households renting has more than doubled since 2001. Unfortunately, in much of the country, renting is also becoming an unaffordable option.