Only top 10% of English earners can afford average home in under five years - ONS

Only the top 10% of income earners can afford an average house with less than five years of income in England, new research shows.

Analysis by the Office for National Statistics (ONS) highlights how many years of income need to be earned to afford the average house price.

In England the average house price was £275,000 in the financial year ending 2022 and the average annual disposable household income was £33,000, equivalent to a ratio of 8.4 years of income.

This compares with average house price to income ratios of 6.4 in Wales, 5.3 in Scotland and 5.1 in Northern Ireland.

Only households in the top 10% of income can afford an average home with fewer than five years of income in England, compared with the top 30% in Wales and the top 40% in Scotland and Northern Ireland, according to the ONS.

Even in the cheapest area, the North East of England, an average priced house has been equivalent to more than five times a low household income since 2002.

Homes have become less affordable in all areas, that means an average priced home is equivalent to more multiples of a 20th percentile income now than in 1999.

London has increased the most, more than doubling from 10.9 in 1999 to 26.5 in 2022, the research shows.

Karen Noye, mortgage expert at wealth manager Quilter, said the differences highlight the wealth gap, putting homeownership further out of reach for many, especially in England.

She said: “This situation will now be even worse as these calculations do not take into account any effects on housing cost affordability resulting from changes to mortgage interest rates and payments stretching people’s budgets that much further leaving with even less to save towards a deposit to buy a property.”

She said the pressures on affordability may lead to a downturn in house prices, adding: “The latest house price indices all point to declining or flatlining house prices.

“However, prices will need to drop considerably or wages increase massively for the affordability ratios to improve. While both are unlikely, the building of new homes to ease the supply and demand dynamic, and help first time buyers is likely to be a central battleground for next year’s election.

“Ultimately, the current housing market dynamics underline the importance of obtaining professional mortgage advice, especially for those nearing the end of their current mortgage deal or looking to buy in the short term. The stark house price to income ratio disparity across the UK mean that it is essential people do not overstretch themselves to a point where they cannot absorb any financial shocks and an adviser will help someone avoid that. 

“The housing market remains unpredictable, necessitating careful planning and robust financial advice for potential borrowers if they can even get to the point of a purchase.”