Housing in Watford became more affordable over the last year, new figures show.
Figures from the Office for National Statistics show full-time employees in Watford could expect to spend 12.5 times their annual earnings on purchasing a home in 2023 – down from 13.9 times the year before.
However, the Institute for Public Policy Research said the housing crisis is not only damaging lives but also holding the economy back and called for an increased investment in genuinely affordable homes.
Last year in England, a house cost 8.3 times the average wage, while the ratio stood at 6.1 in Wales – both slightly down from 8.5 and 6.4 respectively.
While this was the second consecutive fall since 2021, these are still higher than before the pandemic in 2019, when buyers spent 7.9 and 5.8 times their annual earnings.
Maya Singer Hobbs, senior research fellow at the IPPR, said: “The housing affordability crisis is damaging lives and holding back the economy. Its root cause is the failure to build enough homes across the country over several decades, including the failure to build enough genuinely affordable homes.”
She added: “To increase housing supply, and ensure homes are more affordable – whether to rent or buy – we need to reform and streamline the planning system, tackle our dysfunctional land market, and increase investment in genuinely affordable homes.”
Overall, housing affordability improved in three-quarters (75 per cent) of local authorities across England and Wales in 2023, worsened in just under a quarter (24 per cent) and remained the same in 1 per cent, the ONS said.
In England, the average home sold for £290,000 in the 12 months to September, while the average full-time wage was £35,100.
Houses in Watford were 2.5 per cent more expensive in 2023 than the year before, at an average price of £410,000. In the meantime, wages saw a 14.7 per cent year-to-year increase.
Cara Pacitti, senior economist at the Resolution Foundation, said: “Although house prices have stabilised in line with earnings since the pandemic, this does little to correct for the gap between earnings and house prices that has opened in the past 25 years.
“While earnings have doubled since 1997, house prices have increased four-and-a-half times.
“This means high barriers to homeownership for the UK’s renters, who are fully exposed to a housing market that offers the worst value for money of any advanced economy.
“The next Government needs to step up urgently to address the lack of affordable, good quality properties – including by building more new homes and modernising our existing housing stock.”
A spokesperson for the Department for Levelling Up, Housing and Communities said: “We are committed to creating a fair housing system that works for everyone, including increasing first-time buyer numbers in all regions and boosting availability of new, genuinely affordable housing.
“Over 876,000 households have been helped to purchase a home since spring 2010 through Government backed schemes including Help to Buy and Right to Buy.
“Our long-term plan for housing will go even further to build the homes that local communities want and need, backed by £10 billion to boost supply and £11.5 billion for affordable homes.”
Housing affordability improved in three-quarters (75%) of local authorities across England and Wales in 2023, compared with the previous year, according to the Office for National Statistics (ONS).
Affordability worsened in just under a quarter (24%) of local authorities and remained the same in 1%, the ONS said.
Average house prices increased in just over two-thirds (69%) of areas compared with 2022 – but average earnings increased in a bigger proportion of areas, at 88%.
Kensington and Chelsea in London was the least affordable area last year, with an average house price-to-earnings ratio of 34.3.
The most affordable was Burnley in Lancashire, with an average house price-to-earnings ratio of 3.7.
In 2023, 7% of areas typically had homes selling for less than five times the average earnings of workers. This was an improvement compared with 2022; however, in 1997, 88% of areas had this ratio.
The report said: “Therefore, affordability remains considerably worse than at the start of the series.”
Looking at England, in the 12 months to September 2023, the average home sold for £290,000, while average full-time earnings were £35,100.
This means that, in England, full-time employees could expect to spend 8.3 times their earnings on purchasing a home in their local authority area.
This represents an overall improvement in affordability compared with 2022, when the average home in England cost around 8.5 times the average wage.
Since 2022, housing affordability at a local level:
▪️ improved in 75% of local authority districts in England & Wales▪️ worsened in 24%▪️ stayed the same in 1%
Use our interactive map and explore housing affordability over time in your area.➡️ https://t.co/QsKhq5hKcF pic.twitter.com/j6Hlx11tWv
— Office for National Statistics (ONS) (@ONS) March 25, 2024
In Wales, the average home sold for £196,500 in the 12 months to September, while the average workplace-based full-time wage was £32,400.
This gave an affordability ratio of 6.1, down from 6.4 in 2022.
House sales prices have become more affordable since 2021, but remain in line with pre-coronavirus pandemic trends, the ONS said.
The affordability ratio doubled in England from the start of the records in 1997 to 2007.
In 1997, a home in England was worth around three-and-a-half times the average wage, but by 2007 buyers faced paying just over seven times their salary typically to buy a home.
In Wales, affordability ratios doubled from 1997 to 2005 and peaked at 6.6 in 2007. Since then, they have remained between 5.5 and 6.5, with a less pronounced increase and decrease in the past three years than in England, the ONS said.
Mortgage rates have jumped amid increases in the Bank of England base rate, meaning that some existing homeowners could have a payment shock when their deal expires.
Recent signs that inflation is cooling have raised expectations around the potential for the Bank of England to start cutting the base rate in the months ahead.
Homeowners who sold a detached property in 2023 made an average gain of £137,000, compared with the original price paid, according to analysis of figures covering England and Wales.
Those who sold bungalows made the next biggest gross gain typically, at £102,000, Zoopla found.
Homeowners selling semi-detached houses last year made a gain of £81,000 on average, while sellers of terraced properties made £65,000 and those selling flats got around £30,000 more than they had paid for the property.
Homeowners with bungalows typically left 11 years between moves.
People with a detached home left 10 years and those with a semi-detached or terraced home or a flat left nine years on average.
Izabella Lubowiecka, senior property researcher at Zoopla, said: “Most homeowners who sold in 2023 made meaningful capital gains which, for many, will have provided important financial support for their next home move.
“It’s positive news, considering house prices posted modest price falls for the first time in 11 years.
“Lower levels of house price growth mean the potential gains in future are unlikely to be as strong as in the past, which is why more households are looking further to find their new home and seek better value for money.”
Zoopla analysed more than 100,000 Land Registry entries from 2023. Transaction records were matched with previous transaction entries within the preceding 20 years.
Here are the average gains made by sellers of different property types in 2023 compared with the original purchase price, followed by the average selling price:
– Detached, £137,000, £445,000
– Bungalow, £102,000, £315,000
– Semi-detached, £81,000, £270,000
– Terraced, £65,000, £230,000
– Flat, £30,000, £210,000
The average UK house price was £6,000 ($7,612) lower in November last year, falling at the fastest pace in over a decade.
Property values fell by 2.1% over the 12 months to November to reach £285,000 on average, according to the Office for National Statistics (ONS), the biggest drop since 2011.
London was the region with the biggest annual decrease, with prices in the capital falling 6%.
House prices typically fell across the year in England and Wales, but increased in Scotland and Northern Ireland.
Average house prices over the 12 months to November 2023 fell 2.9% in England to £302,000 and dropped 2.4% in Wales to £213,000.
Read more: UK inflation rises to 4% in December in blow to interest rate cut hopes
The typical property value increased in Scotland to £194,000, which represents a 2.2% annual rise.
Average house prices increased by 2.1% annually in Northern Ireland to £180,000.
Within England, the North East recorded a 0.4% drop, the smallest decrease in average house prices in the 12 months to November.
According to an estate agent boss, house hunters are putting their property searches on ice while they wait to see if they can get a cheaper mortgage deal
Nick Leeming, chairman of Jackson-Stops, said: “The figures published today suggest a frosty end to the year with buyers putting their searches on hold in order to see how mortgage rates would react as inflation fell once again. 2023 was defined by mortgage affordability pressures and a shift from immense competition, towards a smaller, more committed buyer pool.”
Aimee North, head of housing market indices at the ONS, said: “The annual fall in house prices continues to accelerate, with the average cost of a home falling at its fastest rate for over 12 years.
“Meanwhile annual rent increases remain at record levels across the country.”
Private rental prices paid by tenants in the UK rose by 6.2% in the 12 months to December 2023.
Read more: How hard is it to get on the property ladder?
Wales that saw the biggest annual increase in rents, with prices rising 7.1% over the year to December, down only slightly from the 7.3% rise in rents in the year to November. In Scotland, rents rose 6.2% over 2023 and England registered a 6.1% increase.
Private rental prices in London increased by 6.8% in the year to December 2023, down slightly from a record-high rise of 6.9% in the 12 months to November 2023.
Watch: How much money do I need to buy a house?
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