The house price to income ratio in England and Wales went back to pre-pandemic levels following a period of worsened housing affordability in 2020 and 2021, government data showed.
The Office for National Statistics’ (ONS’) housing affordability report found that while house prices had risen by 1% since 2021, average earnings had grown by 20% over the same time span.
In England, the average house price of £290,000 in 2024 was 7.7 times the average earnings of £37,600. This was down from a ratio of 8.4 in 2023. In Wales, the average house price of £201,000 was 5.9 times the typical income of £34,300. Compared to 2023, this was slightly better than the house price to income ratio of 6.2.
The ONS said the changes were not typical of its records, as the average house price in England and Wales fell by £7,500 or 2.6% between the 12 months to September 2023 and the 12 months to September 2024.
Over the same period, average earnings rose by 5.6% or £2,400.
However, the ONS said homes in England and Wales had not been affordable on average since 2002, determining this as a property selling for less than five times local earnings.
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When factoring in the minimum wage salary of £22,300, the average home in 2024 cost 12.7 times more.
Still barriers to homeownership
Mark Eaton, chief operating officer at April Mortgages, said: “Housing affordability may have improved to pre-pandemic levels, but it remains a major barrier to homeownership for many people.
“House prices are worth over 10 times average earnings across large parts of Southern and central England, rising to 16 times income in the most unaffordable areas.
“Despite an overall convergence in house prices and wage growth, many buyers are still struggling with mortgage affordability.”
He added: “While there is no magic bullet that will completely fix the problem, there are steps borrowers can take to increase their buying power.
“One of the issues is that borrowers are often too short term-focused, with the market encouraging them to take out two- or five-year fixed deals.
“Modern longer-term mortgages of 10 years or more can help borrowers to qualify for larger loan amounts of up to 6x joint incomes.
“There needs to be greater education and awareness of these products, as they could help many more people get a foot on the property ladder.”
Changes in housing affordability over time
ONS data found that affordability ratios in England doubled from the start of the series in 1997 to 2007, then stayed relatively flat until 2013. This notably increased until 2018.
There was another pronounced increase between 2020 and 2021 as house prices rose, but three years of decreases had taken affordability in England back to levels seen in 2018, 2019 and 2020.
London was the least affordable region of England, but affordability had improved. In 2021, this peaked at 12.9, but by 2024 it returned to 11.1 – similar to levels in 2015.
In Wales, affordability ratios doubled from 1997 to 2005 and peaked at 6.6 in 2007. This has stayed between five-and-a-half and six-and-a-half since 2009, with fewer fluctuations in the last four years than England.
Affordability had worsened faster in some areas than others, with the figures showing that out of the 318 local areas in England and Wales, there was an annual improvement in 289 areas, while 28 areas saw this worsen.
Average house prices rose in a fifth of areas compared to 2023, while average earnings increased in 87% of areas.
Of the 10 areas that saw housing affordability worsen the most, four were in the East Midlands. Meanwhile, 10 of the biggest improvements in housing affordability in the last five years have all been in London.
Still, London’s most affordable local authorities were less achievable than the least affordable area in the North East.
The ONS said the share of affordable homes in Northern England and Wales was a “distinct group” from those in London and the South. Its data showed that 57.4% of homes in London were affordable in 1997, and sold for less than five times the average earnings. By 2024, just 3% of homes were in this affordability bracket.
By contrast, 85.4% of homes in the North East were affordable in 1997, falling to 49.9% by 2024 – a less severe decline.
