More areas across the UK have become more affordable for property investment in the past 12 months, according to new research.
Figures from the Halifax found that almost two-fifths of towns in the UK are now affordable for home purchase, compared to just four per cent in 2008. It is also a two percentage point increase from the 36 per cent affordability levels in 2012. Nevertheless property affordability is still lower than recorded levels in 2003. Prior to the house price boom properties in 43 per cent of towns were considered to be affordable.
The notion of affordability is based on the ability of key public service workers to buy their own home, combined with a comparison of average house price against average earnings. In regions where houses are considered affordable, the ratio of house price to earnings is below four. The lowest house price to earnings ratio for key workers across the UK was seen in the north of England and Scotland. Followed by Wales, the North West and Yorkshire and the Humber.
Unsurprisingly, London and the South East are the least affordable regions for property purchases. The figures showed that four regions across the UK now have an average affordability ratio of less than four, compared to 2008 when no regions had average house prices that were affordable to key workers.
“A combination of declining or static house prices in many areas, combined with some growth in earnings, has contributed to the improvement in housing affordability since 2008,” said Martin Ellis, housing economist at the Halifax.
“However, significant house price growth in the past decade as a whole has meant that housing is still unaffordable in more than half of the towns surveyed.”
Legislation such as the Help to Buy scheme have been welcomed to make housing even more affordable, to help give the property market a boost. However, former economists at the Bank of England have called the scheme “reckless” and suggested that the new programme could have the opposite effect in the long run. Experts at Fathom Consulting have warned in a new report that Help to Buy could re-ignite the housing bubble and push property prices up by as much as 30 per cent in two years.
- Tuesday 14 May 2013