The average house now costs 8x your salary
The Office for National Statistics (ONS) said the average house is now worth £225,000, up 4.5% on a year ago. However, median gross annual full-time earnings in 2017 were £28,952, up only 2.1% over the same period.
This puts the average house price to earnings ratio at 7.77, up from 7.6, the highest on record.
The problem in London is even more acute – the average price in London relative to average earnings has moved to 13.24, up from 12.91 in 2016.
Owen Woodley, chief executive, financial services at the Post Office, said: “Today’s figures – which show workers could expect to pay around 7.8 times their annual earnings when purchasing a home – show that despite a slowdown in house price growth over the past year, a range of factors have continued to place pressure on would-be buyers’ purchasing power – especially those looking to take their first step on the ladder.
“With inflation remaining higher during 2017 than in previous years, and wage growth proving sluggish, it’s no surprise that saving for a deposit remains the biggest barrier for 43% of first-time buyers.”
Separately, the Confederation of British Industry (CBI) reported that two thirds (66%) of the respondents to its London Business Survey said housing costs and availability were having a negative impact on the recruitment of entry-level staff. This is also a record high for the survey.
Eddie Curzon, CBI London director, said: “London’s housing shortage is a ticking time bomb. The potent combination of lack of supply and high prices means businesses themselves are being priced out of the market, as they can’t afford to recruit and retain their workers, from entry-level to senior staff.
“And with two thirds of firms not optimistic the housing market will become more affordable in the next three years, we have a stark challenge on our hands. We’re squarely behind the Mayor’s aim to build 66,000 new homes a year, but want to see more clarity on how he will work with local authorities to crucially unlock supply in every borough.”