In 2023, full-time employees in England could expect to spend around 8.3 times their annual earnings to buy a home. In Wales, this figure was 6.1 times their annual earnings.
At the national level, these ratios remained similar to 2022, indicating a return to the pre-coronavirus (COVID-19) pandemic trend after a significant increase between 2020 and 2021.
Out of the 318 local authorities (LAs) in England and Wales, housing affordability improved in 237 (75%) since 2022, worsened in 77 (24%) and remained the same in the remaining 1%.
However, with prices still above the ONS threshold, we may see more people entering the rental market as they continue to be priced out of home ownership.
Over the last year, the UK saw unprecedented tenant demand thanks to high inflation and interest rates pushing up mortgage rates. With more people looking to rent, savvy property investors may see rents increase further than they already have done to match demand levels, leading to greater potential yields in the buy-to-let property investment market, mainly if they can comfortably afford the running costs of a buy-to-let.
Rightmove predicts that rents will increase by 5% outside of London in 2024, while Savills forecast a 6% rise.
Referring to the ONS 2023 data, 7% of LAs (23) had homes bought for less than five times workers’ earnings, making them affordable. This is higher than in 2022 and similar to numbers before the pandemic.
The ten largest improvements in affordability in the past five years occurred in local authorities in London or bordering London. However, these areas remain some of the least affordable.
New dwellings in each region and country cost more than five times the average earnings in 2023.
Find Out More: To learn more about buy-to-let property investment, check out our guides on buy-to-let tax and how to buy multiple rental properties.
