Tumbling property values hand homebuyers lifeline

Tumbling house prices hand homebuyers affordability lifeline in these areas

The latest research from the Gradual Homeownership provider, Wayhome, has revealed which areas of the property market have seen falling house prices hand struggling homebuyers a lifeline when it comes to the affordability of climbing the property ladder.

Wayhome analysed property affordability across each postcode of England and Wales to see how a cooling housing market has helped those looking to buy, based on the change in the house price to income affordability ratio* versus December 2021 when interest rates first started to rise.

The figures show across England and Wales as a whole, house prices have climbed by 8.5% since December 2021, with the average household now requiring 7.3 times the average household income of £41,900 to cover the average house price of £305,065. That’s a 0.6 increase in this affordability ratio since interest rates started to climb.

However, in many pockets of the property market house prices start to fall and quite substantially at that.

In Gwynedd’s LL46 postcode, the average house price has fallen by -32.7% since December 2021, the largest house price slide of all postcodes in England and Wales.

While this may be bad news for local homeowners, the silver lining is a boost to housing affordability for those looking to buy in the area. Today, the average house price sits at 7.3 times the average household income, down from 10.8 times income in December 2021 – a -3.5 drop.

A -22.5% drop in property values across the SO20 postcode in Hampshire’s Test Valley has seen the housing affordability benchmark fall from 13.3 times household income in December 2021 to 10.3 today.

In South Somerset’s BA10 postcode it’s down from 11.1 to 8.1, with Cornwall’s PL23 postcode also seeing a three point reduction, down from 15 times income in December 2021 to 12 today.

The TQ8 and TQ10 postcodes of South Hams have seen respective reductions of -2.8 and -2.6 times the household income required to cover the cost of the average property.

Other areas to make the top 10 include Northumberland’s NE19 postcode (-2.2), LL36 in Gwynedd (-2), Ceredigion’s SA45 (-1.8) and Richmond’s SW13 postcode (-1.6).

Of course, not all homebuyers are benefitting from the same reduction in housing affordability. In Kensington’s W8 postcode, house prices have climbed by 23.1% since December 2021. As a result, the current average house price of £2m sits at 29.2 times the average household income in the postcode, up 5.5 from 23.7 in December 2021.

In Bournemouth’s BH3 postcode, the average house price is now 14.1 times the average household income, up from 9.4 in December 2021, while Barnet’s N2 postcode has seen a 4.3 increase.

Co-founder and CEO of Wayhome, Nigel Purves, commented:

“Although the market as a whole has stood fairly firm in the face of increasing interest rates, house prices across many pockets of the market have fallen by quite a margin over the last year or so.

While this will come as cause for concern for the nation’s homeowners, it will, at least, be welcomed by the nation’s buyers who are struggling with the sky high cost of homeownership.

Of course, it’s important to note that while many buyers will have seen a boost to overall affordability, securing a mortgage in the current climate will come at a greater cost.

So while it’s great to see that house prices vs income ratios have fallen in some areas it’s important to recognise that they are still unaffordable for the vast majority and, unless a buyer has a significant deposit, they will still be unable to secure a mortgage on their desired property.

When you also consider that even via a route such as Gradual Homeownership, which allows homebuyers to purchase at 10 times their household income, some areas of the property market are still beyond reach, it really highlights the monumental task that many face when looking to buy.”

*House price to income affordability ratio based on the average house price in each area divided by the average household income and the change in this ratio from December 2021 to the current market.