April 26, 2020

London Dominates Least Affordable Housing Areas, According to Quinshaw Finance

The UK capital is home to eight of the country’s top 10 least affordable areas for housing, London-based property experts Quinshaw Finance have revealed. The alternative property lender highlighted the London borough of Kensington and Chelsea as the least affordable place to live in the United Kingdom, while the boroughs of Westminster and Richmond Upon Thames were found to be the second and third most expensive areas respectively. 

Location, location, location…

Quinshaw Finance – which primarily focuses on helping property developers to secure funding – used figures from the Office for National Statistics (ONS) to support their findings, which showed house prices in Kensington and Chelsea are on average 38.33 times more than the median UK annual salary. Similarly, Westminster and Richmond Upon Thames recorded ratios of 20.66 and 18.44, while the London boroughs of Camden, Hammersmith and Fulham, Wandsworth, Haringley and Barnet also featured in the top 10 most expensive housing areas.

On the opposite end of the scale, the Quinshaw Finance reviews of the ONS’ report on ‘Housing affordability in England and Wales’ also shone a light on the most affordable places to live in 2019. With average house prices only around 2.67 times the average annual income, Copeland in Cumbria was found to be the cheapest place to buy a house, while Blaenau Gwent, Hyndburn, Barrow-in-Furness and Burnley were all placed in the top 10 most affordable locations, each with ratios under four times the average UK salary. 

The bigger picture…

As well as highlighting several London boroughs as some of the most expensive places to buy a house in the country, Quinshaw Finance also drew attention to an altogether more positive trend that points to the UK property market as a whole becoming more affordable in 2019. Using ONS data which analysed house prices and annual earnings growth, the property lenders call attention to the fact that housing was less expensive relative to earnings last year when compared to 2018.

While the data suggests that the average UK house buyer would have to spend eight times their annual salary in 2018, in 2019 this ratio dropped to 7.8. This is to say, housing became more affordable in the UK between 2018 and 2019. This improvement has been credited to a rise in median gross earnings brought about by an increase in the minimum wage and a rise in UK average salary from £29,667 to £30,500 between 2018 and 2019. 

‘It is important that homes continue to be affordable…’

Reacting to the findings, Greg Davies, head analyst at Quinshaw Finance, stressed the importance of affordable housing, pointing out that this was the first time in five years that the affordability of property when compared to average annual salary had actually improved. He said: “Given that this happened amid the instability of Brexit negotiations and the general election, it is cause for great confidence in the property market.”

However, in the wake of the COVID-19 pandemic, as well as the possibility of a no-deal Brexit later in the year, it remains to be seen whether this trend will continue in 2020.