How can property investors afford to invest in property when earnings aren’t keeping up with property price rises? The United Kingdom is on the brink of a housing affordability crisis according to new research analysing the property price-to-earnings ratio over the past six decades. The report demonstrates how average property prices have soared 77-fold over the past 57 years, from £3,669 in 1968 to £281,384 in 2024. This unprecedented increase far outstrips the growth in median annual earnings, which have only risen by a factor of 45 over the same period, from £792.59 to £35,585.79. Although the property price rises are great news for investors who have owned their properties for many years, this widening gap between property prices and earnings has made homeownership increasingly challenging, particularly for younger generations like Millennials and Gen Z, who now need nearly twice as many years of earnings to buy a property outright compared to previous generations.
Despite the substantial rise in property prices over the decades, new research has uncovered regional variations in property affordability that may present key investment opportunities for property investors. Join us as we take a closer look at the research.
The most and least affordable years for UK property investment
- In 1968, the average UK property cost £3,669 while full-time employees earned £15.19 per week, equating to an annual income of £792.59 meaning that it cost a little over four-and-a-half years of earnings to buy a house (a 4.63% house price-to-earnings ratio).
- The most favourable period for homebuyers was in 1984 when the average house price was £26,807.25 while the median annual earnings were £7,425.01, resulting in a price-to-earnings ratio of just 3.61.
- Recent years have been the least affordable, with the ratio peaking at 8.38 in 2022.
- Today in 2024, the average house price has soared to c.£281,384.33 while median annual earnings are just £35,585.79, meaning it costs nearly eight times the average annual salary to purchase a property.
The table below provides an interesting snapshot of the UK’s changing house price affordability over the past six decades.
The figures above reveal the national figures over the years. However, when we take a closer look at the regional data, we discover some regions offer more appealing price-to-earnings affordability than others. Let’s start with the least affordable regions.
Least affordable regions in the price-to-earnings index
London
In 2023, London emerged as the least affordable region for property investment, with average property prices of £521,106.42, nearly twelve times the median annual earnings.
The South East of England
The South East followed closely behind London in terms of price-to-earnings affordability, with average property prices of £378,126.92 in 2023, some ten and a half times the annual pay.
East of England
The East of England also presented significant affordability challenges according to the research, with a price-to-earnings ratio of 9.62 and average property prices of £338,205.25 in 2023.
Most affordable regions in the price-to-earnings index
Scotland
Despite the average property price in Scotland increasing from £45,985.25 to £184,932 between 1997 to 2023, the region still boasts the most affordable properties in the UK, with an average property price-to-earnings ratio of 5.04. This affordability is complemented by robust earnings growth, with median annual earnings rising from £15,721.40 in 1997 to £36,671.10 in 2023, reflecting a 133.26 per cent increase.
Northern Ireland
Property prices in Northern Ireland surged from £51,560.75 in 1997 to £175,669.50 in 2023, marking a significant but stable increase. Despite these rises, Northern Ireland also presents a budget-friendly option for property investors according to the data, with a price-to-earnings ratio of 5.25.
Wales
Wales is another region offering significant affordability, with an average property price-to-earnings ratio of 6.44 in 2023. From 1997 to 2023, property prices in Wales rose from £45,488.33 to £212,917.33, a 368.07 per cent increase. Meanwhile, median annual earnings increased from £15,679.66 to £33,065.56, reflecting a growth of 110.88 per cent.
Investors looking to beat the price affordability gap may want to consider these regional affordability trends and historical data to help identify the best opportunities. Interested to learn more? For further detailed insights and data from the research, read the full report by BestBrokers.
