Hometrack, the housing data organisation, has analysed the difference between house prices and the average yearly income in different areas of Britain.
According to the research, which was covered in a November 2016 EstateAgentToday.co.uk article, the highest gap is in London, where the average house costs 14.2 times the average wage in the capital. This is more than twice the national rate of 6.5 times the average local salary.
Cambridge and Oxford house prices are over 10 times local wages, with Bristol not far behind at 9.2 times the local income.
These figures mean that people in these areas on average wages who want to be home owners will be unable to secure a mortgage unless they have a sizeable deposit or increase their salary.
One tactic to get on the property ladder for people on average incomes is to relocate. Houses in the North of England are more affordable, with Liverpool houses at 4.4 times income and Newcastle at 4.8 times income. Glasgow is even more affordable, with the average house costing 3.7 times the annual salary.
The growth in property prices is predicted to slow down due to lack of affordability. Richard Donnell of Hometrack explains:
“In cities where affordability levels are stretched fewer households are able to participate in the market and this reduces levels of turnover and leads to lower levels of house price growth.”
Average and above wage earners who manage to purchase a home need to consider mortgage protection insurance, as this will safeguard mortgage payments if the borrower’s income is lost through sickness or accident.