House Price Crisis - affordability worsening across the UK

The Chartered Institute of Housing, set to unveil its latest annual housing review next month, has indicated that to no one’s surprise, housing affordability has worsened across most areas of the UK.

The review’s annual affordability index sets out the long-term trends in the affordability of an average mortgage by region and country since 1994. 

It shows the deterioration in affordability in the run up to the 2007/08 financial crisis and subsequent improvements before the market strengthened again in recent years. 

The only part of the UK where homes are more affordable now than they were 20 years ago is Northern Ireland. 

However, looking back to the peak of the market in 2008, all regions are more affordable now than they were then. 

The most affordable regions today are Wales, the West Midlands, the North West and the North East. Unsurprisingly, London is the least affordable.

Data from the review on mortgage costs in relation to average incomes also show a favourable picture now compared with 2008 but, in London in particular, mortgage costs are almost as high now as they were at the peak of the market. 

The review points out that while house prices have increased in relation to incomes, mortgage costs are kept in check by the prevailing low interest rates – at least for the moment.

The CIH says that recent figures from the Nationwide highlight worsening affordability in most parts of the UK. 

In East Anglia and the East Midlands, the typical buyer has moved up from the 50th income percentile to the 70th since 2011 and in London, the South West and South East into the 80th income percentile, up from the 60th some 10 years previously. 

Scotland and the North remain at the same level, but Northern Ireland and Wales also show a deterioration. 

The institute says the impact of these shifts is very evident from Office of National Statistics which shows the median income in the UK - around £29,900 in 2020 - is only just above the 30th percentile, which is why homeownership stays out of reach for many would be owners.

James Prestwich, director of policy and external affairs at the Chartered Institute of Housing, says: “Pressures on affordability for those trying to get onto the housing ladder for the first time or to rent a home will not be helped by the rising cost of living. This analysis highlights the need for government to act quickly by building more affordable housing if it is serious about levelling up and boosting home ownership.”