Figures released by the country’s biggest mortgage lender Halifax have revealed that UK house prices fell at their sharpest rate for 14 years.
The data revealed that an average UK home has fallen in price by £14,000 to £279,659 in just one year. In August alone there was a drop of 4.6% compared to the previous year, the largest yearly drop since 2009.
Prices are at their lowest since the beginning of 2022, but still around £40,000 higher than before the pandemic. Recent interest rate increases have contributed to the drop.
Kim Kinnaird, director of Halifax Mortgages said: “Market activity levels slowed during August, and while there is always a seasonality effect at this time of year, it also isn’t surprising given the pace of mortgage rate increases over June and July.”
Decrease in gap between house prices and salaries
The Office for National Statistics figures for 2021 revealed an increase in the gap between average salaries and house prices. Full-time employees were, on average, having to spend around nine times their annual salary to buy a home, up from eight times in just one year. This ratio has dropped considerably since that time.
Kinnaird noted that: “Income growth has remained strong over recent months, which has seen the house price-to-income ratio for first-time buyers fall from a peak of 5.8 in June last year to now 5.1. This is the most affordable level since June 2020, and will be partially offsetting the impact of higher mortgage costs.”
Uswitch mortgages has used median salary and average house price figures to predict that the lower price-to-income ratio will continue into 2025.
The comparison and switching service also looked at the house price to salary gaps across 329 local authorities, contrasting the average median income of £33,101 with the average house price of £270,000. Properties in 253 local authority areas look set to become more affordable.
The largest reduction in the gap between salary and house prices is predicted to be in Allerdale in Cumbria, where Uswitch suggests that the median salary will increase by 20% into 2025, from £33,849 to £40,514, while average house prices there are forecasted to drop by 6%.
Out of the 329 areas analysed, 76 are predicted to have less affordable homes by 2025. Three Rivers in Hertfordshire could have the biggest affordability gap, with house prices expected to rise by 31%, from £560,000 to £731,973.
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