The Office for National Statistics (ONS) has released a report stating that the average house prices in England in the previous year were recorded at £290,000. This represents a decrease in comparison to average annual earnings, dropping from 8.5 times to 8.3 times. The ONS has highlighted that these ratios are consistent with those of 2022 and signal a return to the pre-pandemic trend. This follows a significant increase in 2021, which coincided with a surge in sales volume and changes in stamp duty land tax and land transaction tax.
Despite these improvements, the ONS has emphasized that the housing affordability ratios still remain well above the threshold used as a broad indicator for the price of an average home. A similar pattern was observed in Wales, where the average house price of £196,500 was 6.1 times the average annual earnings, down from 6.4 times in the previous year. However, both figures still exceeded the ONS’ own affordability threshold.
The last time average homes in England and Wales met the five times average annual earnings threshold was in 2002, highlighting the ongoing challenge of housing affordability. Sarah Coles, Hargreaves Lansdown’s head of personal finance, expressed her concerns, stating that houses are currently unaffordable. She emphasized that despite the growth in wages, they have not kept pace with the significant increase in property prices. Coles pointed out that first-time buyers face even greater challenges, with the average home costing 14 times their annual earnings if they are on the national living wage.
Arjan Verbeek, the chief executive of Perenna, recognized the positive shift indicated by the latest ONS figures, showing signs of stabilization in the house price to earnings ratio. However, he noted that the journey towards inclusive and equitable homeownership is far from over. Verbeek highlighted that in the late 1990s, house prices were only around 3.5 times more expensive than average annual earnings, underscoring the ongoing disparity in the housing market.
The findings of the ONS shed light on the persistent challenges in achieving affordable housing, despite the slight improvement in ratios. It is evident that the need to address this issue remains crucial in ensuring access to housing for all individuals.