House prices rise almost three times faster than salaries

Average property price in Kensington and Chelsea has soared by 85% over the past decade, while wages increased by just 3%.


New analysis from independent mortgage broker Private Finance shows the average UK home has increased in value almost three times faster than wages over the past decade.

The average UK home experienced a 43% rise in value between 2008 and 2018, from £160,954 to £229,861.

In comparison, the average annual UK salary has increased by just 15% from £24,606 to £28,860 over the same period.

According to reports, had wages experienced the same percentage increase as house prices, the average employee would now be earning £35,187 per year.

As outlined, homeowners in London boroughs and the Home Counties have witnessed their homes outperform them to the greatest extent – with the average property price in Kensington and Chelsea said to have increased by 85% over the 10-year period.

In the borough, average wage prices have increased by just 3%.

Had homeowners in Kensington and Chelsea seen their wages increase to the same extent as the value of their homes then the average salary in the borough would now be £112,124.

In comparison, the average property price in Camden has shown an increase of 89% over the past decade – with wages said to have increased by 9%.

Similarly, reports revealed that had homeowners in Camden seen an increase of wages to the same extent as their home value, the average salary in the borough would be £77, 424.

According to Private Finance, not only have homeowners benefited from rising property values over this period, but falling mortgage rates mean the monthly cost of owning a home has become considerably more affordable – making their return on investment “even more lucrative”.

As outlined, from 2008 to 2018, the average two-year fixed-rate mortgage at 75% loan-to-value (LTV) has fallen from 4.77% to 1.73%.

While house prices have increased, the average UK homeowner who purchased at the end of 2018 would only be paying £18 (3%) more per month on their monthly mortgage payments thanks to falling mortgage rates – despite the average loan size increasing by 43%.

Simon Checkley, managing director at Private Finance, said: “Property first and foremost provides a roof over your head and a place to call home; however, over the long-term it can act as a lucrative investment.

“With falling mortgage rates making the cost of owning a home even more affordable, homeowners’ potential return on investment could be set to become even greater.

“Many homeowners will undoubtedly take comfort in the fact that over the past 10 years, as they’ve worked hard to earn an income, their home has essentially been doing the same – and arguably even more successfully.

“Though house price growth has slowed in recent years, it remains buoyant in many areas of the country, and has historically remained strong over the long-term.”

He added: “This money needn’t remain locked away in our homes.

“For homeowners looking to stay put, or move to a more manageable house, downsizing and remortgaging are both options that can enable individuals to release some of the money earned by their home to help them with their wider financial goals.”