Do Southerners need to move north to afford to buy a house?

December 1, 2016 by Brendan

House Prices

There are many areas in the South of England where the average house costs more than 25 times the average local wage. To find cheaper housing, some of them might consider relocating to the North.

With good reason, too. A recent report published by property consultants Hometrack looked at the average cost of buying a home compared to the average local wage. The average house in London costs £482,000. With the average London income at £33,720 a year, Hometrack calculated that the average London home costs more than 14 times the average London wage. House prices in London have risen by an average of 86%, and this rate far exceeds the growth in wages.

The average cost of accommodation in the London boroughs of Chelsea and Kensington is over one million pounds. This is about 46 times the annual wage in the area of £26,624. This effectively means that people working in Chelsea or Kensington and earning an average wage, will never be able to afford to live in the area where they work.

To find cheaper housing means living outside of London, however, some areas in South Britain have even more expensive housing than London. People living in St Albans, Hertfordshire need 28 times the average salary to buy a house, and in South Bucks in Buckinghamshire the figure is 25 time the average wage.

Oxford and Cambridge are not far behind London, with the average house costing 13 times more than the average salary.

Nationwide, the average house price is 6.1 times average yearly earnings, and most of the cheaper housing is in the North. In Copeland in West Cumbria, a house can be purchased for just three times the area’s average salary. In Glasgow, the average house is 3.7 times the local average salary. In Liverpool, the average price of a house is £112,700, which is 4.4 times earnings, and in Newcastle the average house costs £122,600 at 4.8 times average earnings. In Burnley, Lancashire the figure is four times local wages.

The good news for people living in the South is that the rise in house prices has slowed down, and is forecast to continue to decrease over the next year.

In his Autumn statement, the Chancellor, Philip Hammond, announced extra money to build new homes, and he has allocated £2.3bn to upgrade the infrastructure that would enable a further 100,000 new homes to be built.

According to Richard Donnell of Hometrack, however, these plans will have no significant effect. He said:

“This will have limited impact on the current profile of housing affordability in the near term which will be dictated by market forces and households’ expectations for jobs and the cost of borrowing.”

The affordability of housing is an issue for people earning an average or lower than average salary. The latest house price figures reveal that for many people currently renting accommodation, the only chance they have of owning a home is to move to a cheaper location, unless the government’s policy of encouraging the building of many more affordable housing is successful.