Homes are ‘earning’ less for their owners

Number of homes ‘earning’ more than their owners has fallen in the UK as price growth continues to slow, according to new research.

Just 8% of local areas have seen average house prices increase by more than total average pay over the last two years with the biggest earner being Richmond-upon-Thames where owners got £55,483 more from their home than at work over two years at £2,312 per month.

But the report from lender the Halifax also shows that the gulf between earnings and property price inflation has shrunk considerably across the UK in recent years and this is improving mortgage affordability.

Historically, home owners in many locations found themselves ‘earning’ more from the annual increase in the value of their property than from their take home pay. That trend is now shifting as a result of weaker house price inflation and stronger wage growth.

The average rise in house prices over the last two years has outstripped post-tax earnings in fewer 8% of local authority districts. This compares to 18% in 2017 and 31% in 2016.

‘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,’ said Russell Galley, managing director of the Halifax.

‘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,’ he added.

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 looking over the last five years, London was the only region to see average house prices increase by more than total average pay at £23,817. Over the same period, the district with the biggest margin was Three Rivers in East of England at £88,281.