New data from Halifax has revealed that house prices have fallen at their fastest rate in 12 years. At an annual decrease of 2.6%, this is equal to a reduction of £7,500 off the average UK house price, indicating that prices could become lower relative to income.
In order to determine which areas of England and Wales are seeing a decrease in the gap between salary and house prices, Uswitch mortgages used historical median salary and average house prices data to forecast the same figures for 2025.
The Office for National Statistics reported that 2021 saw an increase in the gap between average salary and house prices, with full-time employees spending around nine times their annual earnings on purchasing a home, up from eight times in 2020.
The predicted salaries and house prices, and the percentage change in these figures since 2022, allowed Uswitch mortgages to calculate which local authority’s homes will see the greatest change.
Across the 329 local authorities analysed, the 2022 average median income is £33,101, while the average house price is £270,000. Homes in 253 areas are forecast to become more affordable, over three quarters (77%) of the local authorities analysed.
Allerdale, Cumbria, is the local authority expected to have had the greatest increase in home affordability by 2025, at a change of +21.5%. The median salary in this area is forecasted to increase by 20%, from £33,849 to an expected £40,514 in 2025. Meanwhile, the price of homes in the area is forecasted to drop by 6%, meaning residents of Allerdale may find houses more affordable by 2025.
76 local authorities are forecast to have less affordable homes by 2025, just under a quarter of all of the areas analysed (329).
Three Rivers, a local authority in Hertfordshire, is expected to face the greatest decline in household affordability by 2025, at -21.5%. The cost of houses in the areas is expected to rise by just under a third (31%), from £560,000 to £731,973.
However, residents’ median income is only forecast to undergo an 8% increase (£37,361 to £40,205), meaning that the increasing value of houses is far outpacing the average income in the area, making property less affordable.
Uswitch mortgages expert, Kellie Steed, said:
“Our research has provided some promise to those in certain parts of England and Wales hoping to buy a new home in 2025. However, it’s important to understand that high mortgage interest rates could quell much of the balance we expect to see between wage growth and the cost of homes.
In recent months, some lenders have cut their lending by almost 20% due to high mortgage interest rates impacting affordability, so how much the narrowing of this gap will help buyers to get the home they need will depend on the wider economic circumstances in 2025.”
