Over the past two years property has made more money than homeowners although the gap is closing as price growth slows.
Research from the Halifax shows homeowners in the London borough of Richmond-upon-Thames earned £55,483 more from their home than earnings.
Average wages in his borough are £63,592 compared to the average gain in house prices of £119,075 over two years and the gain is 80% of the average UK house deposit of £68,946.
These higher prices give remortgage buyers an opportunity to release capital which they can use to improve their home such as an extension, further increasing the property value.
For home movers leaving Richmond-upon-thames with rising property values to areas with lower growth, they may have extra equity for a deposit to buy a larger home or can reduce their mortgage.
In terms of regions of the UK, over two years average earnings outpaced house price inflation from £19,649 in London up to £35,250 in Scotland.
Earnings and price growth gap closing
In the last two years house prices have outstripped post-tax earnings in 8% of local authority districts (LAD) compared to 18% in 2017 and 31% in 2016.
The following table shows the top ten change in house prices over 2 years compared to earnings for local authority districts.
| Local authorities | Prices change | Excess over earnings |
|---|---|---|
| Richmond upon Thames | £119,075 | £55,483 |
| Winchester | £103,196 | £45,016 |
| South Bucks | £97,806 | £41,376 |
| West Devon | £75,659 | £35,460 |
| Windsor and Maidenhead | £88,437 | £28,284 |
| Wandsworth | £90,482 | £28,234 |
| Bromsgrove | £77,621 | £25,303 |
| Chichester | £73,769 | £24,991 |
| North Dorset | £58,289 | £15,131 |
| Harborough | £69,604 | £14,437 |
In Richmond-upon-Thames house prices have increased by £119,075 outpacing earnings of £63,592 producing the biggest difference over 2 years of £55,483 or the equivalent of £2,312 a month.
Next was Winchester, location of much of the South Downs National Park with an excess of £45,016 with only two districts in London compared to nine from the capital a year ago.
The rise in house prices in these districts means first time buyers would require a higher deposit, larger mortgage or higher earnings to purchase their first home.
Russell Galley, Managing Director Halifax said, the majority of areas where house price inflation outpaced owners’ take-home pay are still to be found in London and the South East.
For buy-to-let landlords purchasing new properties in these districts, they would need a larger deposit or higher rental incomes to cover the interest payments.
Larger gains over five years
Over a longer period of time the largest gains are in London and the South East.
The leading district is Three Rivers in the East of England where house price rise of £215,380 outpaced earnings over this period of £127,100 by an excess of £88,281.
Next is the London borough of Waltham Forest with property values rising £198,680 outpacing earnings with an excess of £78,757 followed by Brent with an excess of £78,667.
Higher property values for older homeowners allows the equity release buyer to access wealth using a lifetime mortgage and maintain their lifestyle or give a child the deposit on their first home.
Russell Galley said, while the slowdown in house price growth may not be welcomed by homeowners, the narrowing gap between prices and wages should improve mortgage affordability for all.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or a buy-to-let investor.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to consolidate debt or pay university fees for grandchildren.
Learn more by using the equity release mortgage calculator, mortgage cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
