Home Buying UK Descends Into Housing Affordability Crisis

UK Descends Into Housing Affordability Crisis


Affordability in the UK housing market has hit a 10-year low, a crisis that makes home ownership an unattainable dream for far too many hard-working people.

New data from The Halifax Building Society reveals that rising house prices and static incomes have combined to make the UK housing market less affordable and accessible than it has been for at least 10 years, which is when The Halifax started tracking this data. 

The average UK home now costs 8.1 times average earnings. In 2020, this figure stood at 7.5 which goes to show just how quickly prices have been rising during the pandemic. 

According to the Halifax, average annual UK earnings are currently £38,600, while the typical home costs a whopping £327,691.

This narrative of historically low affordability contradicts the message that the UK government is trying to put out, which is that they have made the housing market more affordable and more accessible by introducing initiatives such as the stamp duty holiday and 95% government-backed mortgages.

In truth, it seems what the government has done is make it easier for people with plenty of money or existing property assets to upgrade or increase their wealth through further investment in bricks and mortar.

The new demand that the government has created for UK houses has pushed prices through the roof. At the same time, employment has been threatened by the COVID-19 pandemic, and salaries have not risen at anywhere near the pace to match house prices.

Thus, those who are dependent on their monthly income to pay their mortgage or rent or save for a deposit are left feeling hopeless in a market where their competitors have plenty of saved cash or assets to play with.

For homes to become more affordable, we need to see wages increase while house prices remain static – at the moment, there are no signs of either of these things happening.

Russell Galley, Managing Director at Halifax, said:

“House prices rose by 0.4% in July to add £1,122 to the cost of the average property, pulling back some of the ground lost during June (-0.6%, -£1,543). Annual price growth fell to +7.6%, its lowest level since March. This easing was somewhat expected given the strength of price inflation seen last summer, as the market began its recovery from the first lockdown, and with activity supported by the start of the stamp duty holiday. In cash terms, typical prices now stand at just over £261,000, a little below May’s peak but still more than £18,500 higher than a year ago.

“Recent months have been characterised by historically high volumes of buyer activity, with June the busiest month for mortgage completions since 2008. This has been fueled both by the ‘race for space’ and the time-limited stamp duty break. With the latter now entering its final stages (the zero percent rate only applies to the first £250,000 of the purchase price, before reverting back to standard rates from October), buyer activity should continue to ease over the coming months, and a steadier period for the market may lie ahead.

“Latest industry figures show instructions for sale are falling and estate agents are experiencing a drop in their available stock. This general lack of supply should help to support prices in the near-term, as will the exceptionally low cost of borrowing and continued strong customer demand.

“Although there remains some uncertainty over the impact on employment from the unwinding of government support schemes, on balance the risks to the macro-environment are receding, with consumer confidence improving, the labour market recovering, and the economy expanding as restrictions are lifted. Overall, assuming a continuation of recent economic trends, we expect the housing market to remain solid over the next few months, with annual price growth continuing to slow but remaining well into positive territory by the end of the year.”

Leave a Reply