Faster than average house price rises in the South West mean the region has moved even higher up the league table of areas where young earners find it hard to set foot on the ownership ladder. Four of the five least affordable districts in England – Christchurch*, North Cornwall, Torridge* and West Somerset* – are located in the region, according to new figures compiled for the Joseph Rowntree Foundation.
The latest analysis compares local earnings among households under 40 with the average price in each district for a modest 2- or 3-bedroom family home. This shows that access to home ownership remains most problematic across London. But house price to annual income ratios in the South West are close behind – and appear worse than those across the South East because pay rates are lower and house prices have risen proportionately faster.
Using house price data from the Survey of Mortgage Lenders for the end of 2003, the figures identify nine districts where a modestly-sized home costs more than six times the average annual income of local households with earners in their 20s or 30s. These are: Christchurch*, East Devon, North Cornwall, Torridge* and West Somerset* in the South West, the London boroughs of Westminster and Brent, and the West Sussex districts of Chichester and Adur in the South East.
In another 45 areas, young households would need at least five times their yearly earnings to cover the cost of a starter home. While most are located in London, the South West, South East or Eastern regions, they include three rural areas further north that are popular with tourists and second-home owners: South Lakeland in Cumbria, the Derbyshire Dales* and Alnwick* in Northumberland.
Prof. Steve Wilcox of the University of York, who carried out the new study, compares the figures with evidence from mortgage lenders that it is rare for loans to be advanced to individuals at ratios of more than 4.1 times their annual income. Less than a quarter of all loans advanced to first-time buyers are for more than 3.75 times their annual income.
It is similarly rare for advances based on more than one income to exceed a ratio of 3.5 to one. Less than a quarter of loans to these households are for an amount that is more than 3.25 times their combined incomes.
Prof. Wilcox said: “Even allowing for the relatively relaxed attitudes taken by mortgage lenders at a time when interest rates are historically low, these latest figures comparing house prices with earnings demonstrate why even the most modest two-bedroom properties in many parts of London and the South of England are priced beyond the reach of many young working households.”
“It is also clear that affordability issues in the South West have worsened in the past year, relative to London and the South East, due to greater house price rises. This reinforces the case for the Office of the Deputy Prime Minister to review its current plans to concentrate increased funding for affordable housing in London and the wider South East. Similarly, the problems highlighted in popular tourist and second-home areas like South Lakeland and Derbyshire Dales raise questions about the adequacy of government programmes to support the provision of affordable housing in rural areas.”
Across England as a whole, the comparison between local prices for 2- and 3-bedroom homes and gross earnings for working households aged 20 to 39 yields an average ratio of 4.11 to 1.
Lord Best, Director of the Joseph Rowntree Foundation, said: “I feel particularly sorry for parents in the South West: they are likely to be called upon to make substantial contributions to help their adult children buy their first home. Yet incomes in the region are not as high as in London and the South East.”
