In the UK, a significant shift has occurred in the housing market, with over half of two and three-bedroom houses now falling within the budget of households earning the average income. According to research by Zoopla, 51% of these family homes have asking prices below £301,000, marking an increase from 45% last year.
A key factor in determining affordability is the threshold of £301,000, which is the maximum amount a household with a combined income of £53,500 can afford, assuming a mortgage of 4.5 times their income and a 20% deposit.
The rise in affordability has resulted in 84,300 more houses becoming accessible to average earners, driven by wage growth outpacing house price increases. However, sales agreed are still 9% lower than the same period last year, indicating a subdued market.
Regional variations in affordability are notable, with southern and eastern England experiencing the most significant improvements. The South West saw the largest increase, with 9.8 percentage points more houses becoming affordable, reaching 47%. The East of England also saw a significant rise, with 9.2 percentage points more houses becoming affordable, reaching 39%.
In contrast, northern regions have seen smaller gains, as many houses were already affordable for average earners. The North East leads in terms of affordability, with 83% of family homes priced below the threshold, followed by Scotland at 80% and Yorkshire and the Humber at 76%.
The South East remains the least affordable region, with only 23% of houses priced below £301,000. In London, fewer than 100 two and three-bedroom houses are available below this threshold.
Despite the increase in affordable homes, higher mortgage rates are having a dampening effect on the market. Richard Donnell, executive director of Zoopla, noted that “the impact is being offset by higher mortgage rates, which are adding to the monthly costs of taking out a new mortgage.