The latest figures reveal that snagging a home in England might just have become a smidge easier on the pocket compared to the dizzying heights reached during the COVID-19 pandemic. However, don’t start imagining your dream home just yet; experts are quick to temper our excitement, cautioning that for a vast majority, the quintessential English dream of home ownership remains a tough nut to crack due to persistently high property costs.
A Glimpse of Hope in the Housing Market
According to fresh stats from the Office for National Statistics, the stretch between what folks earn and the price of homes in England — officially dubbed the housing affordability ratio — showed a slight improvement. In 2023, this ratio settled at 8.26, a dip from 8.47 in 2022, and notably lower than the peak pandemic figure of 9.06 in 2021. Meanwhile, our neighbours in Wales also saw a light at the end of the tunnel with their ratio dropping to 6.07 from 6.37 the previous year.
But Don’t Pop the Champagne Just Yet
Before you start celebrating, housing experts and economists are here with a splash of cold water, suggesting this bit of good news might not stick around for long. “The numbers might look better, but let’s not start thinking homes are suddenly cheap,” points out Anthony Breach from the think-tank Centre for Cities. The catch? While house prices haven’t soared as much, it’s mainly because folks’ pay packets have gotten a bit fatter lately. But this happy trend of wages outpacing house prices isn’t expected to last.
The backdrop to this cautious optimism includes a spike in UK wage growth since 2022, with earnings (sans bonuses) climbing by 3.5% annually as of the start of this year. Additionally, a recent rise in home sales coupled with a dip in mortgage rates has made the market slightly more welcoming for would-be buyers.
Affordability – A Fleeting Fantasy?
Economists are chiming in with reminders that the current improvement in affordability is likely just a blip on the radar. The root of the problem? The UK’s stubborn housing supply issues, which keep a tight lid on many people’s homeownership dreams. “Homes might be a tad more affordable now, but getting your hands on one is another story. With prices slightly lower, the upfront cash needed has actually gone up,” explains Paul Cheshire, a seasoned expert from the London School of Economics.
The ongoing saga of not building enough new homes and dragging feet on modernising older ones means the UK is languishing with some of the priciest, least appealing housing among leading economies, as per insights from the Resolution Foundation.
A Tougher Climb Than Pre-Pandemic Days
Taking a step back, the broader picture still shows a housing market that’s tougher to crack into than before the global health crisis hit. In the year 2020, the housing affordability ratio for England was at 7.86, having risen in three out of five years leading up to it. Additionally, every single local authority area has seen housing become less attainable since records began in 1997, with areas in the South East, particularly the swanky streets of Kensington and Chelsea in central London, wearing the crown for the least affordable spots.
Echoing the concerns of many, Breach from the Centre for Cities highlights a fundamental flaw: “Our planning system’s failure to align local housing supply with demand has gradually made homes less affordable over time.”