Regional house prices: affordability and income ratios

Transcription

1 Regional house prices: affordability and income ratios Standard Note: SN/SG/1922 Last updated: 29 May 2012 Author: Matthew Keep Social and General Statistics Section The ratio of house prices to income is a key indicator of the relative affordability of owneroccupation. This note provides data on the affordability of houses in England and Wales and house price to income ratios for regions of the United Kingdom. Contents A. Indicators of affordability 2 B. of lower quartile house prices to lower quartile earnings 2 Table 1: of lower quartile house price to lower quartile earnings by region, 1997 to C. of average house prices to average income of borrowers 3 Table 2: of average house prices to average income of borrowers by region D. Simple average house prices and average income of borrowers; UK and regional tables 4 Table 3: prices, income and ratios, North East Table 4: prices, income and ratios, North West Table 5: prices, income and ratios, Yorkshire & the Humber Table 6: prices, income and ratios, East Midlands Table 7: prices, income and ratios, West Midlands Table 8: prices, income and ratios, East Table 9: prices, income and ratios, London Table 10: prices, income and ratios, South East Table 11: prices, income and ratios, South West Table 12: prices, income and ratios, England Table 13: prices, income and ratios, Wales Table 14: prices, income and ratios, Scotland Table 15: prices, income and ratios, Northern Ireland Table 16: prices, income and ratios, UK Standard Notes are compiled for the benefit of Members of Parliament and their personal staff. Authors are available to discuss the contents of these papers with Members and their staff but cannot advise others.

2 A. Indicators of affordability There are a number of different indicators of housing affordability. The ratio of house prices to income is a key indicator of the relative affordability of owner-occupation. Published affordability indicators include: Nationwide ratio of average house prices to first time buyers average individual earnings Halifax ratio of average house prices to all house buyers average individual earnings The Department for Communities and Local Government (DCLG) monitor a measure of affordability for people wanting to enter the housing market by comparing lower quartile house prices with lower quartile individual fulltime earnings (excl. bonuses). This is outlined in Section B below. It should be borne in mind that a significant proportion of households contain more than one earner and consequently ratios based solely on individual earnings may overstate the extent of affordability difficulties. In Section C data is presented on the ratio of average house prices to the average total recorded income of mortgage borrowers. B. of lower quartile house prices to lower quartile earnings DCLG publish data for England on the ratio of lower quartile house prices to lower quartile earnings to assess whether people with the lowest income can afford the cheapest housing. The ratio is calculated by combining data on house prices from HM Land Registry with data on gross annual pay by place of work from the Annual Survey of Hours and Earnings (ASHE). It is also possible to calculate ratio data for Wales using DCLG publications on lower quartile house prices and ASHE data for Wales. HM Land Registry data is for the first half of the year only, so it is comparable to the ASHE data which is as at April each year. ASHE is based on a 1 per cent sample of employee jobs. Information on earnings and hours is obtained in confidence from employers. It does not cover the self-employed nor does it cover employees not paid during the reference period. The statistics used are workplace based full-time individual earnings. The "lower quartile" property price/income is determined by ranking all property prices/incomes in ascending order. The lowest 25 per cent of prices/incomes are below the lower quartile; the highest 75 per cent are above the lower quartile. Table 1 overleaf shows the DCLG published lower quartile house price to lower quartile income ratios for regions of England from 1997 to It is also possible to calculate this ratio for Wales using DCLG publications on lower quartile house prices and ASHE data on lower quartile earnings in Wales. This information has been added to Table 1. 2

3 Table 1: of lower quartile house price to lower quartile earnings by region, 1997 to 2011 Table 1. of lower quartile house price to lower quartile earnings by region 1997 to p North East North West Yorkshire & the Humber East Midlands West Midlands East London South East South West England Wales Notes: 'p' figures are provisional Sources: Communities and Local Government, Live Tables on Housing Affordability, Table 576, Table 583 Office for National Statistics. Annual Survey of Hours and Earnings [accessed via nomisw eb] Table 1 shows that in both England and Wales the ratio of lower quartile house prices to lower quartile earnings tended to increase year on year between 1997 and In 2008 the ratio decreased in all regions, with even more pronounced reductions occurring in The experience of regions in subsequent years has differed. In 2011, the highest ratios of lower quartile house prices to incomes are found in London (9.0), the South East (8.2) and the South West (7.8). C. of average house prices to average income of borrowers As previously noted a significant proportion of households contain more than one earner. Therefore, house price to earnings ratios based on individual earnings tend to overstate the extent of affordability difficulties. DCLG publish information on the ratio of simple average house prices to the average total recorded income of mortgage borrowers. The information is based upon data from the Council of Mortgage Lenders (CML), a trade association for mortgage lenders in the UK whose members undertake around 98% of UK residential mortgage lending. Table 2 shows the ratio of average house prices to the average total recorded income of mortgage borrowers for individual countries of the UK and for English regions. The data shows a broadly similar pattern for England (including regional data), Wales, Scotland and the UK as a whole: after a period of relative stability in the late 1990s, the house price to income ratio increased between 2000 and 2004, then declined in 2005 and 2006 with a period of relative stability following to In Northern Ireland the house price to income ratio has increased rapidly between 2002 (3.0) and 2007 (4.9), and has decreased in subsequent years to 2010 (4.0). 3

4 Table 2: of average house prices to average income of borrowers by region Table 2 of average house prices to average income of borrowers by region North East North West Yorkshire & the Humber East Midlands West Midlands East London South East South West England Wales Scotland Northern Ireland United Kingdom D. Simple average house prices and average income of borrowers; UK and regional tables The tables presented in this section provide the data which underpin the ratios shown in Table 2. They show: the simple average house price; the average income of borrowers; and, the associated house price to income ratio for regions of England, the constituent countries of the UK and the UK as a whole. 4

5 Table 3: prices, income and ratios, North East of average house prices to average earnings Region - North East ,374 15, ,395 16, ,485 17, ,725 18, ,893 18, ,565 18, ,009 19, ,824 20, ,957 21, ,620 24, ,921 24, ,813 26, ,971 27, ,344 30, ,611 32, ,210 34, ,125 38, ,295 41, ,532 43, ,825 44, ,785 44, Table 4: prices, income and ratios, North West average house prices to average earnings Region - North West ,361 17, ,951 18, ,488 19, ,641 19, ,242 20, ,231 20, ,609 21, ,077 23, ,666 24, ,017 26, ,913 27, ,402 28, ,074 30, ,003 33, ,095 34, ,440 37, ,506 41, ,072 44, ,849 45, ,305 46, ,573 47,

6 Table 5: prices, income and ratios, Yorkshire & the Humber average house prices to average earnings Region - Yorkshire & the Humber ,231 16, ,343 17, ,291 18, ,572 18, ,352 19, ,356 19, ,867 21, ,019 22, ,214 23, ,416 24, ,176 25, ,368 27, ,126 29, ,253 32, ,317 34, ,014 37, ,247 41, ,203 43, ,158 45, ,040 45, ,383 46, Table 6: prices, income and ratios, East Midlands average house prices to average earnings Region - East Midlands ,620 17, ,740 18, ,551 18, ,797 19, ,119 19, ,060 20, ,855 21, ,930 23, ,155 24, ,437 26, ,323 27, ,280 28, ,835 31, ,013 35, ,493 36, ,487 39, ,336 42, ,255 44, ,025 45, ,415 45, ,958 47,

7 Table 7: prices, income and ratios, West Midlands average house prices to average earnings Region - West Midlands ,694 17, ,659 18, ,881 19, ,508 19, ,089 20, ,123 21, ,320 23, ,803 23, ,864 24, ,757 27, ,431 28, ,650 30, ,313 32, ,371 35, ,846 36, ,904 39, ,182 44, ,048 45, ,260 46, ,900 46, ,498 49, Table 8: prices, income and ratios, East average house prices to average earnings Region - East ,671 22, ,865 22, ,198 21, ,756 22, ,431 23, ,036 24, ,403 26, ,378 27, ,682 29, ,841 30, ,813 32, ,858 36, ,330 39, ,234 42, ,985 41, ,661 45, ,125 52, ,147 55, ,439 56, ,491 54, ,906 58,

8 Table 9: prices, income and ratios, London average house prices to average earnings Region - London ,821 26, ,742 27, ,049 26, ,332 27, ,631 29, ,528 30, ,065 31, ,819 33, ,783 35, ,321 41, ,577 44, ,325 49, ,246 53, ,864 53, ,886 56, ,548 61, ,544 76, ,122 81, ,494 81, ,120 75, ,180 82, Table 10: prices, income and ratios, South East average house prices to average earnings Region - South East ,638 23, ,696 24, ,528 24, ,239 24, ,513 26, ,030 26, ,644 28, ,842 30, ,378 32, ,654 35, ,790 37, ,964 41, ,243 43, ,971 46, ,000 46, ,537 50, ,889 58, ,054 62, ,143 62, ,968 60, ,715 65,

9 Table 11: prices, income and ratios, South West average house prices to average earnings Region - South West ,378 19, ,346 20, ,654 20, ,319 20, ,847 21, ,096 21, ,034 22, ,004 24, ,203 25, ,217 27, ,233 29, ,639 32, ,403 37, ,482 39, ,926 39, ,686 43, ,586 49, ,885 52, ,085 52, ,404 50, ,245 53, Table 12: prices, income and ratios, England average house prices to average earnings Region - England ,173 20, ,299 20, ,692 21, ,572 21, ,518 22, ,066 23, ,210 25, ,831 26, ,695 27, ,133 30, ,998 32, ,563 35, ,278 37, ,820 40, ,002 41, ,409 45, ,045 52, ,054 55, ,112 56, ,512 55, ,580 59,

10 Table 13: prices, income and ratios, Wales average house prices to average earnings Region - Wales ,464 16, ,989 17, ,551 17, ,465 19, ,106 19, ,978 19, ,898 20, ,372 21, ,902 22, ,483 24, ,285 26, ,628 27, ,261 29, ,661 31, ,141 33, ,979 36, ,457 41, ,848 43, ,948 44, ,659 43, ,784 45, Table 14: prices, income and ratios, Scotland average house prices to average earnings Region - Scotland ,744 17, ,772 19, ,010 20, ,568 19, ,651 19, ,143 20, ,674 21, ,883 22, ,585 24, ,312 25, ,961 26, ,570 28, ,655 28, ,641 31, ,932 34, ,631 36, ,192 40, ,798 42, ,593 45, ,433 47, ,715 49,

11 Table 15: prices, income and ratios, Northern Ireland average house prices to average earnings Region - Northern Ireland ,849 14, ,392 16, ,287 18, ,880 16, ,651 16, ,810 18, ,678 19, ,309 20, ,376 21, ,267 23, ,514 24, ,885 26, ,829 28, ,217 27, ,188 30, ,229 34, ,259 41, ,701 46, ,282 46, ,867 44, ,033 41, Table 16: prices, income and ratios, UK average house prices to average earnings United Kingdom ,785 19, ,455 20, ,366 20, ,333 21, ,787 22, ,644 23, ,626 24, ,103 26, ,774 27, ,521 29, ,550 31, ,835 33, ,265 36, ,627 38, ,248 39, ,760 43, ,813 50, ,405 53, ,765 54, ,064 53, ,634 57,