Although raising large sums of money for a deposit on a property is not an easy task for most people, it is certainly worth doing after it has been shown that house price increases supersede salary incomes in one-fifth of the country.
Halifax recently revealed average property values have risen by more than total average pay in 18 per cent of the UK over the last two years, particularly in London’s Barnet. Here, homeowners saw their houses increase in price by £106,896 in 24 months, which works out as £52,256 more than average earnings in the area.
The majority of the top ten locations in the country where the difference in house prices and earnings was the highest were in London and the south-east, while homeowners in North Hertfordshire also saw a substantial return on their property. Here, values rose by £95,417 over the last two years, which is £40,903 more than typical earnings at £54,514.
Speaking about the findings, managing director at Halifax Russell Galley said: “Despite the slowdown in house price growth in southern England, it has still outpaced wages across most of the region. This means that middle earners are also facing a challenge getting on to the property ladder.”
Indeed, as house values continue to rise steeply in certain locations, those wanting to buy here could end up locked out of the market.
In London, for instance, buyers have to put down a deposit of £135,272, and house prices here are rising at a much faster pace than salary increases.
One way potential homebuyers can get themselves on the property ladder is by purchasing a house that may need a lot of work doing, and therefore, is on the market at a much lower price.
They could then extend, expand or improve the house themselves and create their dream home without the hefty price tag.
For instance, adding a conservatory in Manchester to a smaller house would give property buyers the space they want without forcing them to look for much larger homes that will be out of their budget.
While Halifax’s findings also revealed a decline in house prices outpacing earnings – from 31 per cent in 2016 to 18 per cent in 2017 – property values are still rising.
According to the Office for National Statistic’s latest House Price Index, homes have risen in value by 4.4 per cent from February 2017 to 2018. Despite a slight drop in values from January 2018 by 0.1 per cent, the price increase has generally remained around five per cent for the last year.
Therefore, property owners can expect their homes to continue to increase in value over the next few months, and in many locations outstrip their earnings.
Similarly, homebuyers will have to watch their dream houses rise in price while they try to boost their deposit to get on the market.
Those desperate to become a homeowner could head to the north, however, as Halifax reported that 86 per cent of the areas where house price increases are higher than median earnings are in the southern part of the country.
