How affordable is Housing in the United Kingdom

How affordable is Housing in the United Kingdom?


According to the latest Halifax economic research by the Lloyds Banking Group, affordability for first time buyers is at its 8 year high. While this seems like good news for first time buyers, I am a wary as to what affordability really means.

The same report states the the larger deposit required in the last few years has driven down the number of first time buyers. In 2007, the required desposit was £17,482 on average, but in 2011, it was £27,032 on average. As a porportion of the purchase price, the average deposit required has increased from 10% to 20% between the years 2007 and 2011. How the Halifax report can then deduce that afforability is at an eight year high is baffling.

The only way the above really makes sense is due to house prices falling in a number of areas, and even then, you can’t apply FTB affordability on a macro scale. For example, the areas of Pendle and Hyndburn (which featured in a previous publication on the top 10 areas in the UK which has the highest percentage of empty homes) have affordability in the region of 2.5 to 3.0 but the homes are uninhabited and will remain that way.

Furthermore, affordability should be a medium to long term view. Of course, an individual or couple could scrape together the deposit required, but what about paying the mortgage, stamp duty, council tax and the concerns of losing employment and so on. These factors, I feel, should somehow be incorporated when publishing reports on affordability for first time buyers.

The report does however, point out some key general findings and we summarise these below:

Scotland seems like a good bet for investing in long term cashflow property or for a first time buyer with South Ayrshire in particular a key location. Seven of the ten most affordable Local Authority Districts for a FTB are in Scotland. South Ayrshire is the most affordable with an average property price that is just over two and a half times (2.65) gross average annual earnings. The next most affordable areas are Northumberland (2.86) and Renfrewshire (2.88). Peterborough in the East of England is the most affordable LAD in southern England (3.98).

In the South of England, Peterborough is current hotspot. If you’re an investor who buys in the South of England, this report tells me that Peterborough, if the rest of the economic indicators support this, could be a property hotspot. We can certainly help you to invest in this area as our asylum housing investments are available in the area. An investor always needs an exit and if affordability is at an average of 3.98, then an investor who can cover cashflow will be in a good position to exit as prices will be affordable to the first time buyer. If you can widen your net as much as possible, then your exits will be smoother.

Source: Lloyds Banking Group

Most Affordable Local Authorities in 2011

Local Authority Region PE ratio
South Ayrshire Scotland 2.65
Northumberland North East 2.86
Renfrewshire Scotland 2.88
Pendle North West 2.9
North Ayrshire Scotland 2.94
County Durham North East 2.95
Inverclyde Scotland 2.96
Stirling Scotland 2.98
Fife Scotland 3.02
West Dunbartonshire Scotland 3.05

Source: Halifax

Least Affordable Local Authorities in 2011

Local Authority Region PE ratio
Brent London 9.11
Oxford South East 7.75
Harrow London 7.23
Hammersmith and Fulham London 7.13
Hackney London 6.78
Ealing London 6.78
Hillingdon London 6.66
Haringey London 6.55
Waltham Forest London 6.46
Camden London 6.36

Source: Halifax

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