UK house prices are that their least affordable since before the 1992 house prices crash. At the present moment, one in four households are unable to afford to buy their own home. Worryingly, most new home buyers now need five times their annual salary to be able to afford to buy a home. Home track, a company that supplies housing data said that the ratio of house price to income has now reached unprecedented levels. In at least 40 areas, to buy a house you need more than 5 times annual earnings and in the whole of the United Kingdom, there are less than 19 areas where a property can be purchased for less than the more traditional three times earnings.
As many people have borrowed money at high multiples banking on the fact that interest rates will stay at an affordable level, there is real chance that some homeowners are facing hardship in the coming months. Some, have a mortgage on a fixed rate basis, but when this ends, what then?, money markets are currently in turmoil, the amount of funds available as a mortgage or re-mortgage is not as high as it was. Certainly in you are applying for a mortgage in the coming few months, it will not be as simple as it has been in the last few years to obtain funds ant sensible levels.
Other interesting statistics recently released show that the North South prosperity gap is reducing with house prices, earnings and in fact employment rising faster in the north of England. The average full time earnings have rising by 22% in the northern regions in the last five years whilst in the south the figure is 18%. Employment is rising at almost double of that being achieved in the South.
Homeowners too have seen some staggering increases in house prices, up almost 97 % in 5 years against a more modest 52% in the South. However, it can be argued that house prices in the south where already at a respectable level and property prices in the north were merely catching up. It is known that many people particularly the young first time buyers have had to migrate to more affordable parts of the country to buy a first home and of course, with them they take their skills and labour which is benefiting the economy in the North.
Although the average wage in the South is some £6,000 higher than in the North, after taxation and national insurance, monies available to put to towards a mortgage on a property that is substantially more expensive don’t travel too far. People are demanding cheaper homes and at the present moment, the amount of disposable income is also running at an all time high. It follows that companies are going to wish to relocate in to areas that key workers can afford to live and have a comfortable lifestyle and work done in the last twenty years to improve the infrastructure of many Northern Towns, means they are becoming more desirable and affordable than many of their southern counterparts.
House prices at record levels and the recent introduction of the Home Information pack have also resulted in the steep decline recently of three bedroom houses coming on to the market. The drop is in the region of 37% amongst properties that require a home information pack. Many homeowners are being put off by the cost of moving and most are worried that property prices are about to take a dip. Home Information packs were designed to speed up the selling process but if anything this ill-conceived idea seems to helping a market already in trouble stagnate even more. The developing trend amongst homeowners is to sit tight and wait and see what happens. no one wants to spend money on fees moving to a bigger home only to see interest rates rise again, property prices slip and the spectre of negative equity and all the associated problems become an issue.