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 2011 3 C. of average house prices to average income of borrowers 3 Table 2: of average house prices to average income of borrowers by region 1997-2010 4 D. Simple average house prices and average income of borrowers; UK and regional tables 4 Table 3: prices, income and ratios, North East 1990-2010 5 Table 4: prices, income and ratios, North West 1990 2010 5 Table 5: prices, income and ratios, Yorkshire & the Humber 1990 2010 6 Table 6: prices, income and ratios, East Midlands 1990 2010 6 Table 7: prices, income and ratios, West Midlands 1990 2010 7 Table 8: prices, income and ratios, East 1990 2010 7 Table 9: prices, income and ratios, London 1990 2010 8 Table 10: prices, income and ratios, South East 1990 2010 8 Table 11: prices, income and ratios, South West 1990 2010 9 Table 12: prices, income and ratios, England 1990 2010 9 Table 13: prices, income and ratios, Wales 1990 2010 10 Table 14: prices, income and ratios, Scotland 1990 2010 10 Table 15: prices, income and ratios, Northern Ireland 1990 2010 11 Table 16: prices, income and ratios, UK 1990 2010 11 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.
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 http://www.nationwide.co.uk/hpi/downloads/ftb_hper.xls Halifax ratio of average house prices to all house buyers average individual earnings http://www.lloydsbankinggroup.com/media/excel/2012/hpi_quarterly/affordabilityq12012.xls 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 2011. 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
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 2011 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 p North East 2.9 2.8 2.7 2.8 2.6 2.7 3.1 4.1 4.8 5.3 5.5 5.4 4.9 4.9 4.6 North West 2.9 2.9 2.8 2.9 2.9 2.9 3.3 4.4 5.0 5.6 5.9 5.7 5.0 5.1 5.0 Yorkshire & the Humber 3.1 3.0 3.1 3.0 3.0 3.1 3.5 4.8 5.3 5.8 6.2 6.0 5.2 5.4 5.1 East Midlands 3.2 3.2 3.3 3.4 3.6 4.0 4.9 6.1 6.5 6.7 7.0 6.6 5.7 5.8 5.7 West Midlands 3.5 3.4 3.4 3.5 3.7 4.2 5.0 6.0 6.5 6.8 6.9 6.6 5.8 5.6 5.9 East 3.7 3.8 4.0 4.4 4.8 5.6 6.7 7.6 8.0 8.1 8.6 8.3 7.2 7.7 7.6 London 3.9 4.2 4.6 5.4 6.0 6.8 7.7 8.3 8.5 8.7 9.1 9.3 8.0 9.0 9.0 South East 4.2 4.4 4.5 5.2 5.6 6.3 7.5 8.1 8.6 8.6 8.9 8.8 7.7 8.5 8.2 South West 4.0 4.0 4.3 4.7 5.2 5.9 7.1 8.2 8.6 8.5 8.9 8.8 7.6 8.2 7.8 England 3.6 3.6 3.7 3.9 4.1 4.5 5.2 6.3 6.8 7.1 7.2 7.0 6.3 6.7 6.5 Wales 3.2 3.1 3.2 3.1 3.1 3.5 4.2 5.4 6.1 6.5 6.9 6.2 5.7 5.6.. 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 2007. In 2008 the ratio decreased in all regions, with even more pronounced reductions occurring in 2009. 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 2010. 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
Table 2: of average house prices to average income of borrowers by region 1997-2010 Table 2 of average house prices to average income of borrowers by region 1997-2010 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 North East 2.5 2.6 2.5 2.6 2.7 2.9 3.3 3.9 3.9 3.6 3.7 3.7 3.6 3. 6 North West 2.7 2.7 2.8 2.8 2.9 3.0 3.5 4.0 4.0 3.8 3.8 3.8 3.7 3. 8 Yorkshire & the Humber 2.7 2.7 2.7 2.8 2.8 3.0 3.5 4.0 4.0 3.8 3.9 3.8 3.8 3.9 East Midlands 2.7 2.7 2.8 2.9 3.1 3.3 3.8 4.3 4.1 3.9 4.0 3.9 3.8 3.9 West Midlands 2.9 2.9 3.0 3.1 3.3 3.4 3.9 4.4 4.3 4.0 4.1 4.0 4.0 4.1 East 2.9 3.0 3.2 3.4 3.5 3.8 4.3 4.8 4.6 4.2 4.3 4.3 4.3 4. 5 London 3.1 3.3 3.4 3.7 3.7 3.9 4.5 4.8 4.6 4.0 4.2 4.3 4.5 4.7 South East 3.1 3.3 3.5 3.8 3.8 4.1 4.6 5.1 4.8 4.4 4.5 4.5 4.5 4. 7 South West 3.0 3.2 3.2 3.5 3.6 3.8 4.4 5.0 4.7 4.3 4.4 4.4 4.4 4. 5 England 3.0 3.0 3.1 3.3 3.4 3.6 4.1 4.6 4.5 4.1 4.2 4.2 4.2 4.4 Wales 2.7 2.7 2.7 2.8 2.9 3.0 3.5 4.1 4.1 3.8 3.9 3.8 3.8 3.8 Scotland 2.6 2.6 2.7 2.6 2.6 2.7 3.2 3.5 3.5 3.4 3.7 3.7 3.6 3. 7 Northern Ireland 2.6 2.8 2.9 3.0 3.0 3.0 3.4 3.6 3.7 4.1 4.9 4.7 4.2 4.0 United Kingdom 2.9 3.0 3.1 3.3 3.3 3.5 4.0 4.5 4.4 4.0 4.2 4.2 4.2 4.3 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
Table 3: prices, income and ratios, North East 1990-2010 of average house prices to average earnings Region - North East 1990 41,374 15,756 2.6 1991 45,395 16,991 2.7 1992 47,485 17,655 2.7 1993 48,725 18,443 2.6 1994 48,893 18,924 2.6 1995 46,565 18,811 2.5 1996 51,009 19,268 2.6 1997 52,824 20,729 2.5 1998 55,957 21,865 2.6 1999 61,620 24,191 2.5 2000 63,921 24,966 2.6 2001 69,813 26,222 2.7 2002 78,971 27,282 2.9 2003 100,344 30,613 3.3 2004 126,611 32,236 3.9 2005 135,210 34,834 3.9 2006 141,125 38,741 3.6 2007 152,295 41,211 3.7 2008 158,532 43,245 3.7 2009 156,825 44,140 3.6 2010 161,785 44,835 3.6 Table 4: prices, income and ratios, North West 1990 2010 average house prices to average earnings Region - North West 1990 50,361 17,590 2.9 1991 52,951 18,183 2.9 1992 56,488 19,162 2.9 1993 55,641 19,602 2.8 1994 57,242 20,469 2.8 1995 56,231 20,923 2.7 1996 57,609 21,361 2.7 1997 63,077 23,097 2.7 1998 65,666 24,384 2.7 1999 72,017 26,135 2.8 2000 77,913 27,608 2.8 2001 82,402 28,675 2.9 2002 92,074 30,915 3.0 2003 115,003 33,026 3.5 2004 139,095 34,571 4.0 2005 149,440 37,603 4.0 2006 157,506 41,844 3.8 2007 170,072 44,178 3.8 2008 174,849 45,802 3.8 2009 174,305 46,626 3.7 2010 183,573 47,991 3.8 5
Table 5: prices, income and ratios, Yorkshire & the Humber 1990 2010 average house prices to average earnings Region - Yorkshire & the Humber 1990 47,231 16,393 2.9 1991 52,343 17,654 3.0 1992 52,291 18,227 2.9 1993 54,572 18,980 2.9 1994 54,352 19,414 2.8 1995 54,356 19,947 2.7 1996 55,867 21,058 2.7 1997 60,019 22,512 2.7 1998 62,214 23,170 2.7 1999 67,416 24,877 2.7 2000 72,176 25,958 2.8 2001 76,368 27,047 2.8 2002 88,126 29,183 3.0 2003 114,253 32,923 3.5 2004 137,317 34,053 4.0 2005 148,014 37,210 4.0 2006 158,247 41,652 3.8 2007 170,203 43,436 3.9 2008 173,158 45,051 3.8 2009 176,040 45,849 3.8 2010 182,383 46,738 3.9 Table 6: prices, income and ratios, East Midlands 1990 2010 average house prices to average earnings Region - East Midlands 1990 52,620 17,576 3.0 1991 55,740 18,331 3.0 1992 54,551 18,950 2.9 1993 53,797 19,088 2.8 1994 55,119 19,384 2.8 1995 55,060 20,481 2.7 1996 58,855 21,749 2.7 1997 61,930 23,175 2.7 1998 66,155 24,148 2.7 1999 72,437 26,114 2.8 2000 79,323 27,078 2.9 2001 87,280 28,305 3.1 2002 104,835 31,994 3.3 2003 132,013 35,022 3.8 2004 154,493 36,042 4.3 2005 161,487 39,185 4.1 2006 164,336 42,151 3.9 2007 176,255 44,476 4.0 2008 177,025 45,610 3.9 2009 172,415 45,133 3.8 2010 184,958 47,165 3.9 6
Table 7: prices, income and ratios, West Midlands 1990 2010 average house prices to average earnings Region - West Midlands 1990 54,694 17,700 3.1 1991 58,659 18,968 3.1 1992 57,881 19,620 3.0 1993 58,508 19,896 2.9 1994 59,089 20,001 3.0 1995 62,123 21,923 2.8 1996 64,320 23,077 2.8 1997 67,803 23,471 2.9 1998 71,864 24,927 2.9 1999 79,757 27,000 3.0 2000 88,431 28,281 3.1 2001 97,650 30,036 3.3 2002 112,313 32,990 3.4 2003 137,371 35,680 3.9 2004 161,846 36,680 4.4 2005 168,904 39,047 4.3 2006 177,182 44,086 4.0 2007 185,048 45,033 4.1 2008 185,260 46,125 4.0 2009 184,900 46,633 4.0 2010 201,498 49,358 4.1 Table 8: prices, income and ratios, East 1990 2010 average house prices to average earnings Region - East 1990 71,671 22,074 3.2 1991 69,865 22,179 3.2 1992 65,198 21,630 3.0 1993 66,756 22,703 2.9 1994 69,431 23,488 3.0 1995 70,036 24,408 2.9 1996 73,403 26,137 2.8 1997 81,378 27,793 2.9 1998 88,682 29,238 3.0 1999 96,841 30,733 3.2 2000 111,813 32,898 3.4 2001 127,858 36,751 3.5 2002 151,330 39,839 3.8 2003 183,234 42,175 4.3 2004 202,985 41,906 4.8 2005 211,661 45,832 4.6 2006 221,125 52,825 4.2 2007 238,147 55,166 4.3 2008 244,439 56,389 4.3 2009 233,491 54,614 4.3 2010 261,906 58,692 4.5 7
Table 9: prices, income and ratios, London 1990 2010 average house prices to average earnings Region - London 1990 83,821 26,575 3.2 1991 85,742 27,020 3.2 1992 78,049 26,537 2.9 1993 81,332 27,761 2.9 1994 87,631 29,280 3.0 1995 89,528 30,292 3.0 1996 94,065 31,482 3.0 1997 105,819 33,839 3.1 1998 114,783 35,316 3.3 1999 142,321 41,308 3.4 2000 163,577 44,217 3.7 2001 182,325 49,682 3.7 2002 207,246 53,245 3.9 2003 241,864 53,746 4.5 2004 272,886 56,490 4.8 2005 282,548 61,532 4.6 2006 305,544 76,140 4.0 2007 342,122 81,480 4.2 2008 351,494 81,681 4.3 2009 338,120 75,119 4.5 2010 385,180 82,811 4.7 Table 10: prices, income and ratios, South East 1990 2010 average house prices to average earnings Region - South East 1990 81,638 23,631 3.5 1991 80,696 24,423 3.3 1992 76,528 24,199 3.2 1993 77,239 24,955 3.1 1994 82,513 26,225 3.1 1995 83,030 26,903 3.1 1996 87,644 28,688 3.1 1997 94,842 30,195 3.1 1998 106,378 32,221 3.3 1999 121,654 35,227 3.5 2000 142,790 37,917 3.8 2001 156,964 41,773 3.8 2002 180,243 43,596 4.1 2003 214,971 46,642 4.6 2004 237,000 46,631 5.1 2005 243,537 50,443 4.8 2006 256,889 58,851 4.4 2007 278,054 62,192 4.5 2008 285,143 62,869 4.5 2009 273,968 60,752 4.5 2010 309,715 65,796 4.7 8
Table 11: prices, income and ratios, South West 1990 2010 average house prices to average earnings Region - South West 1990 65,378 19,990 3.3 1991 65,346 20,306 3.2 1992 61,654 20,068 3.1 1993 61,319 20,131 3.0 1994 64,847 21,303 3.0 1995 65,096 21,708 3.0 1996 68,034 22,935 3.0 1997 73,004 24,072 3.0 1998 80,203 25,373 3.2 1999 89,217 27,608 3.2 2000 104,233 29,989 3.5 2001 118,639 32,553 3.6 2002 142,403 37,376 3.8 2003 174,482 39,799 4.4 2004 197,926 39,748 5.0 2005 204,686 43,225 4.7 2006 213,586 49,620 4.3 2007 230,885 52,182 4.4 2008 230,085 52,201 4.4 2009 220,404 50,557 4.4 2010 240,245 53,605 4.5 Table 12: prices, income and ratios, England 1990 2010 average house prices to average earnings Region - England 1990 63,173 20,124 3.1 1991 65,299 20,962 3.1 1992 63,692 21,314 3.0 1993 64,572 21,938 2.9 1994 67,518 22,833 3.0 1995 68,066 23,650 2.9 1996 72,210 25,101 2.9 1997 78,831 26,701 3.0 1998 84,695 27,937 3.0 1999 96,133 30,573 3.1 2000 106,998 32,100 3.3 2001 119,563 35,077 3.4 2002 137,278 37,745 3.6 2003 166,820 40,203 4.1 2004 192,002 41,303 4.6 2005 202,409 45,267 4.5 2006 214,045 52,424 4.1 2007 232,054 55,232 4.2 2008 237,112 56,183 4.2 2009 233,512 55,113 4.2 2010 261,580 59,468 4.4 9
Table 13: prices, income and ratios, Wales 1990 2010 average house prices to average earnings Region - Wales 1990 46,464 16,809 2.8 1991 48,989 17,776 2.8 1992 49,551 17,797 2.8 1993 52,465 19,082 2.7 1994 53,106 19,403 2.7 1995 52,978 19,134 2.8 1996 54,898 20,927 2.6 1997 58,372 21,606 2.7 1998 60,902 22,460 2.7 1999 67,483 24,956 2.7 2000 72,285 26,063 2.8 2001 79,628 27,894 2.9 2002 88,261 29,008 3.0 2003 109,661 31,050 3.5 2004 138,141 33,850 4.1 2005 149,979 36,651 4.1 2006 157,457 41,331 3.8 2007 169,848 43,607 3.9 2008 169,948 44,385 3.8 2009 165,659 43,404 3.8 2010 171,784 45,162 3.8 Table 14: prices, income and ratios, Scotland 1990 2010 average house prices to average earnings Region - Scotland 1990 41,744 17,069 2.4 1991 48,772 19,003 2.6 1992 50,010 20,059 2.5 1993 49,568 19,233 2.6 1994 50,651 19,928 2.5 1995 53,143 20,928 2.5 1996 56,674 21,877 2.6 1997 57,883 22,450 2.6 1998 63,585 24,151 2.6 1999 69,312 25,936 2.7 2000 69,961 26,877 2.6 2001 73,570 28,495 2.6 2002 77,655 28,669 2.7 2003 103,641 31,945 3.2 2004 118,932 34,080 3.5 2005 129,631 36,714 3.5 2006 137,192 40,079 3.4 2007 158,798 42,781 3.7 2008 168,593 45,088 3.7 2009 174,433 47,955 3.6 2010 185,715 49,749 3.7 10
Table 15: prices, income and ratios, Northern Ireland 1990 2010 average house prices to average earnings Region - Northern Ireland 1990 31,849 14,583 2.2 1991 35,392 16,404 2.2 1992 38,287 18,077 2.1 1993 38,880 16,678 2.3 1994 38,651 16,293 2.4 1995 42,810 18,341 2.3 1996 47,678 19,197 2.5 1997 53,309 20,457 2.6 1998 59,376 21,505 2.8 1999 66,267 23,176 2.9 2000 72,514 24,202 3.0 2001 79,885 26,326 3.0 2002 83,829 28,057 3.0 2003 95,217 27,643 3.4 2004 110,188 30,576 3.6 2005 129,229 34,619 3.7 2006 169,259 41,177 4.1 2007 229,701 46,532 4.9 2008 218,282 46,803 4.7 2009 184,867 44,214 4.2 2010 168,033 41,785 4.0 Table 16: prices, income and ratios, UK 1990 2010 average house prices to average earnings United Kingdom 1990 59,785 19,576 3.1 1991 62,455 20,549 3.0 1992 61,366 20,991 2.9 1993 62,333 21,492 2.9 1994 64,787 22,288 2.9 1995 65,644 23,114 2.8 1996 70,626 24,740 2.9 1997 76,103 26,086 2.9 1998 81,774 27,317 3.0 1999 92,521 29,864 3.1 2000 101,550 31,193 3.3 2001 112,835 33,967 3.3 2002 128,265 36,277 3.5 2003 155,627 38,538 4.0 2004 180,248 39,873 4.5 2005 190,760 43,690 4.4 2006 204,813 50,789 4.0 2007 223,405 53,617 4.2 2008 227,765 54,527 4.2 2009 226,064 53,975 4.2 2010 251,634 57,996 4.3 11