House Prices Increase Faster Than An Average Income

According to IH, the good news is that it is a big improvement on the peak of the housing market boom four years ago. A survey out today from the Halifax headlines the fact that rising wages and falling house prices mean 38% of towns are now affordable for key workers compared to just 3% in 2007. On the other hand it should be taken into notice that affordable in this case is defined as house prices being less than four times their average earnings.

House prices are still so expensive for key workers that the only places they can afford to buy in the whole of London and the South East are Clacton and Portsmouth. The first piece of bad news is that Halifax is talking about nurses, paramedics, teachers and police officers and fire fighters rather than equally essential but lower-paid key workers like bus drivers and hospital cleaners. Second, the improvement is only on 2007. Ten years ago, there were 26 affordable towns in the South East, now there are two. In 2001, there were even two affordable boroughs in London (Barking & Dagenham and Newham), now there are none. Third, huge variations in house price falls and increases mean the most affordable towns are all in the old industrial areas of the North West, North East, South Wales and central Scotland - places like Nelson, Lochgelly, Bootle and Ebbw Vale. Wrexham has seen the biggest improvement.

The Halifax survey reveals the obvious point that house prices in expensive areas tend to rise faster than earnings in general and key worker earnings in particular.

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