THE average local house price is now more than five times the local annual salary in every local authority area across the South West, according to new analysis published today (Monday) by the TUC.
The analysis shows that in 1997 the average (median) house price was less than five times the average local salary in 31 of the 35 local authority areas across the South West. By 2013, there were no areas where house prices were affordable.
The affordability ratio of five is particularly significant, says the TUC, as the Bank of England has recently instructed banks to limit the proportion of mortgages they offer that are more than 4.5 times applicants’ salaries. It also means that home ownership is being pushed out of reach for local people, particularly if they only have one salary.
Cotswold is still the most unaffordable area in the South West, with a house price to local salary ratio of 11.6. Back in 1997, average house prices in the area were 5.5 times the average local salary.
In 1997, Plymouth, Swindon and Gloucester were all ‘easily affordable’, with house price to wage ratios around three. They are all now out of reach for many local people.
The TUC believes that the combination of soaring house prices, stagnating pay in the run-up to the crash and the longest real wage squeeze in over a century will leave house prices more out of reach than ever before.
Recent analysis by the TUC found that pay packets in South West fell by around £1,800 a year in real terms between 2010 and 2013 – a fall of 6.8 per cent.
South West TUC Regional Secretary Nigel Costley said: “Areas across the South West face a major housing crisis.
“Over the last 16 years, house price rises have outstripped peoples’ pay packets and left huge swathes unaffordable. Last year, house prices were more than five times the average local salary in every area of the region.
“We need to build more homes to get house prices back under control. With interest rates low, now is the perfect time for an ambitious programme of home-building, which would also help tackle local unemployment problems.
“But as more people give up on buying a home or decide they don’t want to get on the housing ladder, we also need a better deal for renters so that they don’t get clobbered by soaring rents.
“Housing affordability isn’t just about house prices though. Decent wages are just as important and there is a lot of ground to make up before we return to the kind of salaries that people were earning before the crash.”