Housing affordability in England and Wales stayed at similar levels in 2018, following five years of decreasing affordability, but new homes are less affordable, official data shows.
On average, full time workers could expect to pay an estimated 7.8 times their annual workplace based earnings on purchasing a home in England and Wales last year, the figures from the Office for National Statistics (ONS) reveal.
At the local level, London boroughs had the widest range of estimated housing affordability; more than three times the range of any other region while Copeland, in the North West of England, was the most affordable local authority with average house prices being 2.5 times average workplace based annual earnings.
Kensington and Chelsea was the least affordable local authority in 2018, with average house prices being 44.5 times workplace based average annual earnings.
But the figures are different when it comes to new homes. Full-time employees could typically expect to spend 9.6 times their median gross annual earnings on purchasing a newly-built property compared with 7.6 times their annual earnings on an existing property.
The data also shows that there were 77 local authorities that became less affordable over the last five years and most were in London, the South East and the East of England, while there were no local authorities in which affordability improved.
Overall the affordability ratio has increased by 0.8% since 2017, but the ONS report says that this change is not statistically significant, but it was the first time in five years that housing affordability remained at a similar level, following five years of decreasing affordability.
‘While the 2017 to 2018 change is not statistically significant, it is interesting to note that this is driven by the fact that median house prices increased faster than median gross annual full-time earnings, the price paid for properties rose by 3.3% while earnings rose 2.6%,’ the report points out.
There were no significant changes in the ratio of median house prices to median annual earnings in either England or Wales between 2017 and 2018. Housing remained significantly more affordable in Wales than in England in 2018.
However, the two countries had different changes in their house prices and estimated earnings over this year. In Wales, house prices increased more than earnings in 2018. In England, house prices and earnings increased more than in Wales, but the difference between these was larger in Wales than in England.
‘This suggests that affordability worsened more in Wales than in England. However, it is important to note that the decreases in affordability in both England and Wales were not statistically significant,’ the report adds.
London was the only region to show some evidence of improving estimated affordability between 2017 and 2018, with properties becoming 1% more affordable, but again the change was not statistically significant, although the report says that these signs of improving affordability contrast with the longer term trend of worsening affordability over the previous two decades.
Outside of London, estimates for all other English regions and Wales showed signs of worsening affordability between 2017 and 2018. However, these regional changes were not statistically significant and so could be the result of the margin of uncertainty around the earnings estimates, the report adds.
