There were further signs that the property market was slowing last month. Although, many of the indices show prices continuing to rise, transaction levels were subdued. Nationwide, for example, reported a 2.1% house price rise in March but, at the same time, there was a fall in sales volumes and, according to surveyors, a shortage of new instructions.
The slowdown has been blamed by many on the widening gap between wages and house prices. The ONS (Office for National Statistics) has found, on average, full-time workers can now expect to pay around 7.8 times their annual salary when purchasing a home in England and Wales.
This is in spite of the record low cost of mortgages and is considerably more than most lenders’ caps of 4.5 times earnings. It also shows, very clearly, why it is so difficult for people to buy houses without the financial support of a working partner.
In London, as you’d expect, the ratio was even higher, at 13.24 times average local incomes. Even in the cheapest region, the North East, it’s at 5.18 times earnings. To put this into some sort of perspective, back in 2002 the average ratio across the country was just 5 times income.
Miles Shipside, Rightmove director and housing market analyst comments:
“Higher prices stretch buyers’ willingness to pay or ability to afford them. This month’s increase of 0.4% is the lowest at this time of year since 2008, though the subdued figure could partly be a re-balancing from the seasonally large 1.5% rise the previous month.”
As a result of the slowdown, the market is becoming more price sensitive. Properties are now achieving, on average, 96.7% of their asking price. In London that figure is 95.6%, although in the West Midlands it has gone up from 96.4%, four years ago, to 97.5% and, in Scotland, it’s now 99.4% (source: Rightmove).
Miles Shipside of Rightmove believes that some of this disparity is a result of people over pricing their homes when they come onto the market and urges a more realistic approach to pricing, saying,
“Buyers can easily spot a speculative price and ignore”