Close up of some twenty pound notes

Category: house prices

The Office for National Statistics (ONS) has released latest statistics for house prices in England and Wales, making clear that the Private Rental Sector will remain in strong demand as housing remains unaffordable for many.

In England, average house prices stood at £290,000 last year, which is 8.3 times the average annual earnings figure. In Wales house prices averaged at £196,500, which is 6.1 times the average annual earnings figure.

Affordable housing is broadly calculated as being within five times someone’s salary, which both these figures fall well outside of.

Whilst house prices remain greater than average salaries, the follow on impact is that rather than buy, those needing homes will largely fall back on renting from the private sector.

House prices trends

The latest 2023 figures for England show a slight decrease from 8.5 times the average annual earnings figure for 2022, and in Wales the 2023 figure is down from 6.4 times average annual earnings in 2022. Nonetheless this will be little comfort for those trying to get on the property ladder.

For landlords the upshot will inevitably be sustained demand for their properties, as has been the case throughout 2023. Within the industry this comes as no surprise, tenant demand has been exceptionally high and is only being compounded as some landlords exit the market.

Spokespeople for landlords have made repeated calls on the government to recognise the essential part that landlords play in housing the UK population.

In 2020-2021 house prices peaked at the same time that Stamp Duty Land Tax for England and Land Transaction Tax for Wales were temporarily reduced.

The data just released by the ONS therefore represents a return to more normal trends, referred to in a statement from them:

These ratios are similar to 2022, and represent a return to the pre-pandemic trend after a large increase between 2020 and 2021.

The sharp price increases in 2021 coincided with increases in the volume of sales and changes in stamp duty land tax and land transaction tax.

Therefore, the ratios in 2022 and 2023 are a return to the long-term trend, following the sharp increase in 2021.

Industry reaction

Representatives speaking from the perspective of first time buyers underline the expectation that landlord properties will remain in great demand as they reflect on the void between house prices and UK salaries.

Sarah Coles, head of personal finance for Hargreaves Lansdown had this to say:

Houses are frankly unaffordable at the moment. The pandemic property boom ratcheted up the cost of property, and while wages are growing faster at the moment, they fell so far behind house prices in recent years that there’s acres of ground yet to be made up.

She went on to add:

For first-time buyers, life is even tougher. For someone on the national living wage, working 37.5 hours a week and buying the average home, they would need to spend 14 times their annual earnings.

With positive movement in buy to let mortgage rates, off the back of the recent hold in the Base Rate, landlords may well be compelled to re-explore additional investment in rental properties.