House price rises outstripped wage growth in more than 90% of England and Wales last year, according to official data that prompted talk of a possible full-blown “affordability crisis”.
The Office for National Statistics (ONS) said house prices grew faster than earnings in 91% of local authority districts in 2021.
It added that in England a home typically cost an average of 9.1 times earnings – up from 7.9 times earnings in 2020. In 1997 the figure was about 3.5.
The data comes after multiple surveys indicating that, two years on from the start of the coronavirus pandemic, the housing market has continued to defy economic conditions. This month Halifax building society said UK house prices were rising at their fastest rate since 2007.
The ONS said housing affordability had worsened in 300 of 331 local authority areas last year. It added that in England average property prices increased by 14%, while average earnings fell by nearly 1%.
Some may be surprised to learn that affordability had “significantly improved” in two of the capital’s priciest locations: the City of London and Westminster, it said. In the latter borough, the house prices to earnings ratio fell to 18.9 times earnings. In 2018 it was almost 25.
Kensington and Chelsea remained the least affordable local authority area in England and Wales, with average house prices estimated at 36.5 times the typical annual wage.
The jump from 7.9 times to 9.1 times earnings was described as a statistically significant increase. However, the ONS acknowledged that the earnings data included payments to workers who were furloughed during the pandemic. It said its figures were based on actual payments made to employees from company payrolls and that in the case of furloughed workers it had assumed their usual hours.
Separate official data from the Land Registry revealed that annual UK house-price inflation was running at 9.6% in January – down slightly on December’s 10% figure. That took the average price tag to £273,762.
However, the UK annual rise figure disguises wide regional variations: in London, prices were up 2.2% on a year earlier, while in Wales they leapt 13.9%.
The Land Registry said annual price growth for new-build properties was running at 25.4%, which stood out to some observers as startlingly high, though the government body pointed to some issues with the data that might help explain the figure.
It said it had made some methodology changes because of the impact of the pandemic on the housing market and that “the processing of new-build properties has been more affected”.
Sarah Coles, a senior personal finance analyst at the investment firm Hargreaves Lansdown, said while furlough pay made the affordability figures look more dramatic, the UK “may be edging towards an affordability crisis”.
The estate agent Savills said: “Rapid house-price growth and rising interest rates are creating a perfect storm for first-time buyers.”
The ONS also issued a report stating that private rents paid by tenants in the UK rose by an average of 2.3% in the 12 months to February. However, previous surveys had indicated that many renters faced even bigger hikes. In January the property website Rightmove said private rents in Britain were rising at their fastest rate on record, with the average advertised cost outside London 9.9% higher than a year ago.