Over the past two years house price growth has exceeded earnings for a fifth of homeowners by as much as £52,000 in some areas.
The latest research from the Halifax has revealed the rise in house prices in the past two years for 18% of UK local areas has exceeded household earnings for first time buyers, remortgage buyers and home movers.
The borough of Barnet in London exceeded the average take-home earnings in the area by £52,256, the highest in the country and equating to £2,177 per month.
North Hertfordshire in the East of England is the next biggest gap with £40,903, the only area outside of London and the South East.
The data shows the proportions of areas where house prices outpace earnings has dropped from 31% in 2016 to 18% or from 119 areas to 71.
Gap is slowing over past two years
Russell Galley managing director at Halifax said, over the past two years we have seen house price growth and earnings converge at a national level.
This is leading to a drop in the total number of areas where the average house price rise is greater than owners take-home earnings although in southern England it still outpaces wages.
The following table from the Halifax shows the top ten local areas change in house prices and gain over earnings for the last two years ending 2017.
| Local Authority | House price | Gain over earnings |
|---|---|---|
| Barnet | £106,896 | £52,256 |
| North Hertfordshire | £95,417 | £40,903 |
| Newham | £75,304 | £30,135 |
| Worthing | £73,342 | £29,871 |
| Canterbury | £75,798 | £28,345 |
| Croydon | £79,064 | £27,386 |
| Guildford | £77,664 | £22,672 |
| Oxford | £71,275 | £22,513 |
| Fareham | £67,799 | £20,228 |
| Merton | £73,800 | £20,016 |
The leading local area is Barnet with house prices rising £106,896 compared to earnings of £54,611 for the last two years with a gain of £52,256.
For buy-to-let landlords with existing properties the rise in house prices creates more equity which they can benefit from if they sell in the future.
All the top ten areas are in London or the South East with only North Hertfordshire in the East of England the exception.
This means that first time buyers are also facing a challenge getting onto the property ladder and in Barnet the gap is 73% of the average £71,297 deposit on UK house prices.
For remortgage buyers these higher prices over the last two years give them an opportunity to release capital which they can use to improve their home.
London dominates over the long term
Over five years there are 73 local areas in the UK where the average house prices have increased more than total average earnings with nine of the top ten in London.
Seven of the top ten areas had a change in house prices in excess of £200,000 and three areas have recorded a gain over earnings of over £100,000 for the past five years.
Barnet is the greatest with a change in house prices of £246,999 compared to earnings of £130,266 for the last five years with a gain of £116,734.
This was followed by Merton with a difference of £115,892, Waltham Forest with £103,227 and Haringey on £95,561.
For home movers the gap between their current home and the next increases which means they need a larger deposit or mortgage.
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 or grandchild for a deposit on their first home.
What are your next steps?
Talk to our London City Mortgage advisers if you are an older homeowner releasing equity from your property, we can recommend the lifetime mortgage to access wealth for home or garden improvements and holidays of a lifetime.
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