Homes in the majority of places in England and Wales are now more affordable than they were in 1997 thanks to falling inflation, low interest rates and rising wages. For the average householder their ability to buy a home has improved over the last 18 years, according to research from Hamptons International.
The estate agent’s Ability to Buy index showed affordability increasing from 133.2 points in 1997, the year in which the study started, to 135.5 points in the first three months of 2015, meaning that more people are finding it easier to purchase their first home or move up the ladder, and have more money left over after their mortgage payments
The situation has also improved from the last quarter of 2014 to the first quarter of this year, according to the index, which tracks the ability to buy for four household types – two full-time earners with no children; two full-time earners with children; one full-time and one part-time earner with two children; and a single, first-time buyer.
However, the national picture is polarised as affordability has continued to improve in the North East, North West, Yorkshire & Humber, East Midlands, West Midlands and Wales from 1997 to 2015 but deteriorated in London, the East, the South East and the South West.
“The ability to buy is improving across England and Wales. In the first quarter of 2015 most households had more money left over after paying essentials to put towards buying a home,” said Johnny Morris, head of residential research at Hamptons International. “That said the ability to buy differs significantly across the country. In London and the South East house price growth has outstripped wages and the lower costs of living, making it more difficult to buy. In contrast the regions of the Northern Powerhouse have seen the ability get better and better.”
The study revealed that in the first quarter of this year, a first-time buyer in London had £85 less left over after mortgage payments compared to the first three months of 2014. In all other regions of the country, first-time buyers saw an increase in cash after servicing their home loan.
A household that included a full-time worker, part-time worker and children found themselves £69 out of pocket after mortgage payments over the same time frame.
“As the London economy continues to strengthen more workers are being pulled in from across the country and from overseas,” said Mr Morris. “This putting upward pressure on house prices.”
Although the London market started to slow last autumn, the supply-demand imbalance is still propping up values.
Only last week official data from the Land Registry showed that annual house price growth for England and Wales reached 5.4pc in the 12 months to June, compared with 9.2pc in London.