Ratio of House Prices to Income in UK
- In 2003 Average household income in England was = £34,197 Average house price = £115,181
House price to income ratio = 3.36 - In 2008 Average income was about £38,302 (1) Average house price =£197,000 (BBC)
Therefore house price to income ratio about 5.1
- London average house prices 4.8 times income (2006), against 2.6 times in 1970.
- The South East, where the ratio has climbed to 4.3 times income from 2.7 times 35 years ago, is the second least affordable region.
House Prices and Mortgage Payments
This increase in house prices is reflected in the increased burden of mortgage payments
- Mortgage interest burden stands at 20% of gross income (up from 11% in 2003) (source Economist)
- Household debt now exceeds 150% of disposable income (this is another historical high)
The Impact of Rising House Prices to Income
The ratio of house prices to Income remains an important guide to long term affordability of housing.
However, it does not make it a perfect guide to future house prices. Just because the ratio of house prices to incomes have increased doesn’t necessarily mean a house price crash will occur.
Nevertheless, the rising ratio of house prices to incomes does raise some serious concerns. (more…)
Original post by Tejvan R Pettinger