Honourable and personal residential letting experts

24Apr

If people can’t buy, will they rent? What are the options?

The lovely people at the Office for National Statistics (ONS) have come up with some very interesting information. The main points being:

  • In 2023 the average house price in England was £290,000.
  • The average salary in England was £35,000.
  • This is 8.3 times average annual earnings.
  • In 2022 this was 8.5 times average annual earnings.

In the East of England the average sold price for a property in the last 12 months was £399,645 (Zoopla) with the average salary coming in at £40,000 (Plum Plot). This would mean that in our area the ratio is nearer 10 times average annual earnings.  

Which means that purchasing a home is out of a lot of people’s ability. The pandemic property boom ratcheted up the cost of property, and while wages are growing faster at the moment, they have fallen quite away behind house prices in recent years that there’s quite a gap yet to be made up.

For first time buyers, life is even harder. For someone on the National Living Wage, working 37.5 hours a week and buying the average home, they would need to spend 19 times their annual earnings. Mortgage providers also consider that when a household spends 25% of its after-tax income on the mortgage, it’s considered to be at risk of falling behind on payments. Therefore, the average first-time buyer mortgage has now stretched to 32 years.

What does this mean?

Obviously, people need a home and therefore if they can’t buy or find social accommodation, they will be needing to access the private rental sector market.  However, there is an affordability issue building here as well – mainly due to the provision of rent protection insurance. Read my recent blog on this matter.

There is absolutely no doubt that landlords play an important role in providing homes. And rental values will increase driven by demand issues. What the figures from the ONS are showing is that the PRS is here to stay.