Improved UK housing affordability offers hope for young buyers

House price to income ratio dropped 0.6% in the second quarter of 2023, marking the most significant year-on-year improvement in affordability for the month of June since 2009

Industry expert David Hannah, Chairman of Cornerstone Group International – the UK’s leading property tax experts – discusses the current state of the property market

The UK housing market has witnessed an improvement in affordability for young buyers due to rising wages, partially leading to a decrease in property prices. According to mortgage lender Halifax, the house price-to-income ratio decreased from 7.3 times average earnings in 2022 to 6.7 in the second quarter of 2023. This stands as the most substantial year-on-year enhancement in affordability for the month of June since 2009. In light of this trend, David Hannah, Chairman of Cornerstone Group International – the UK’s leading property tax experts – delves into the current state of the property market.

 The drop in property prices has been attributed to the Bank of England’s 14th consecutive interest rate hike, bringing rates to 5.25% – the highest level in 15 years. These actions have had a cooling effect on the housing market after the surge in activity post-pandemic. Hannah argues that for first-time buyers with the means to invest in property, now presents an opportune moment, given that the average UK property is currently valued at £260,828 – 0.2% lower than in June and 4.5% below the average price recorded in August 2022.

However, even though property prices are now more within reach for first-time buyers, certain affluent areas like London and the South East remain less affordable, with prices still notably surpassing average earnings. Additionally, mortgage costs have experienced a significant surge, with typical monthly repayments increasing by over £200 in the past year and constituting 35% of income in Q2 2023.

David Hannah, Chairman at Cornerstone Group International, discusses the effect of rising rates on the property market:

“The predictable downward trend in house prices comes as no surprise, given the lingering effects of rate uncertainty and affordability challenges in the market. Prospective buyers are still caught between adopting a cautious approach and displaying heightened assertiveness while making property offers.

“Nevertheless, there is a glimmer of hope as certain lenders are reducing mortgage expenses in response to the approaching peak of the bank rate. This suggests that although market sentiment may remain restrained, I hold the belief that the second half of this year will witness an improvement.” 

Kindly shared by Cornerstone Tax

Main article photo courtesy of Adobe Stock