New research by hybrid estate agent, eMoov.co.uk, has revealed that the average house price across the UK is 6.05 times that of the average wage, with a gap of £6,111 between the current average wage and the wage required for a general mortgage approval of 4.5 times the salary.
eMoov compared the latest Land Registry house price data with the recently updated Office for National Statistics wage data, to highlight where across the UK presents the biggest obstacle for aspiring homeowners both in terms of the wage to house price ratio and the reality gap between the average wage available and the wage required to secure a mortgage in each area.
The average property price was divided by the average wage to find the wage to property price ratio. eMoov then worked out the mortgage deficit by deducting a 10% deposit from the average house price before dividing it by 4.5 – the general multiple of a salary required for mortgage approval. eMoov then calculated the difference between the average salary in an area and the salary required to purchase a property at the average house price for that area.
You can see the full data file for each UK region and the breakdown of top 10s and London, as well as data for Scotland, Wales and Northern Ireland here.
With the price of the London property market continuing to spiral out of control, it is no surprise that, with the exception of Purbeck in Dorset, the areas for the worst deficit are in London. It is by far the worst region of the UK with the average house price 12.05 times the average wage.
Hackney is the worst of the bunch with an average house price of £575,511, 17.03 times the average wage of £33,800. Brent (x16.37) and Haringey (x16.21) are also home to an average property price over 16 times that of the average wage for the area. Waltham Forest (x15.69), Ealing (x14.77), Harrow (x14.73) and Barnet (x14.18) are the amongst the other worst offenders and Purbeck is the only non-London entry in the top 10 at 14.12 times the average wage.
Hammersmith and Fulham (x14.06) and Newham (x13.81) complete the top 10 worst.
Outside of the capital, the gap closes slightly, although the top ten are all home to a deficit of more than 12 times the average wage to house price.
After Purbeck, the worst area is Oxford with the average house price of £408,448 13.18 times the average salary of £31,000. South Bucks (x13.08), Hertsmere (x12.95), Three Rivers (x12.81), South Hames (x12.65), Broxbourne (x12.53), Christchurch (x12.47), Epsom and Ewell (x12.44) and Brighton and Hove (x12.43) complete the top 10 worst outside of London.
As with the wage to property deficit the top 10 worst where the gap in earnings for mortgage requirements are all in London with the exception of one.
Despite having some of the largest wages on offer in the capital the high price of property in Kensington and Chelsea, Westminster and Camden means that the gap between the average wage on offer and the wage needed to secure a mortgage is over £100,000, -£162,086, -£131,126 and -£106,138 respectively.
Hammersmith and Fulham (-£99,476) and Hackney (-£81,302) are also home to some of the largest deficits in London and South Bucks is the only entry in the top 10 outside of the capital, with a gap of -£79,314 between the average wage and the wage required for a general mortgage approval.
Haringey (-£77,813), Richmond (-£74,924), Islington (-£74,530) and Wandsworth (-£71,190) complete the top 10.
At the other end of the table, the 10 best areas are home to an average house price under five times that of the average wage, although they are for the large part located in the North, Wales and Scotland – so not much hope for homeowners in the south.
With an average house price of £80,605, just 3.43 times the average wage (£23,500), Burnley is home to the smallest gap between the cost of living and the available earnings on offer.
Easy Ayrshire (x3.66), Inverclyde (x3.67), Blaenau Gwent (x3.74), West Dunbartonshire (x3.76), North Ayrshire (x3.85), Copeland (x3.86), North Lanarkshire (x3.91), Rhondda Cynon Taf (x4.03), and County Durham (x4.04) complete the 10 best where the average wage and house price deficit is concerned.
Burnley again takes the top spot where financial requirements for a mortgage are concerned. The average wage of £23,500 is £7,379 more than the 4.5 times requirement (£16,121) on the average house price of £80,605.
All of the top 10 exceed the financial mortgage requirements by more than £4,000 but again, are for the large part in the North and Scotland. They are Copeland (£7,055), Inverclyde (£7,016), East Ayrshire (£6,262), West Dunbartonshire (£6,265), North Ayrshire (£5,819), Blaenau Gwent (£5,305), County Durham (£4,731) and Hartlepool (£4,700).
As already mentioned, London is by far the worst with the South West (x9.55) surprisingly the second worst. The South East (x9.50) and the East of England x9.33) are more predictably the next largest gaps. The North East is the best despite the lower wage, with the average house price of £123,749 just 4.95 times more.
London is also home to the biggest gap between average wage and the wage required for mortgage approval at -£55,541, with the North East the only region with a positive difference at of £250.
Russell Quirk, founder and CEO of eMoov.co.uk, had this to say: “When London is thrown into the spotlight in terms of the unaffordability of its property market, many are quick to highlight that the wages on offer are higher in the capital. However, this research shows that despite this, the gap between what hopeful London buyers are earning and what they are having to pay for a property is still way out of kilter and climbing.
Not only this, but the reality gap between the average wage and wage required for mortgage approval is a staggering. Of course, many of us buy with a partner or friend in order to get on the ladder, but even when sharing this burden there is still a considerable financial mountain to climb.
It also shows that elsewhere around the nation there is almost a direct correlation between what a property goes for and the earnings on offer. But regardless of where you live and what you earn, there has been a serious unbalance between the escalating price of property and the stagnating wages available to UK buyers. This really needs to be addressed to help current and future UK buyers get a foot on the ladder and continue climbing it.”