In real terms, house prices have fallen since the financial crisis of 2007, according to figures from the Office of National Statistics. Adding house price inflation to the price of an average house in June 2007 increases its value from £186,348 to £234,753 – over £11,000 more than the average house price today. The figures reveal that residential properties are selling for less today than they did in 2007 in 58% of wards.
There were 30% more completed house sale transactions ten years ago than in the last year. The number of first time buyers and cash buyers are much the same as they were in 2007, but there are now half the number of movers and even fewer buy-to-let purchasers.
The price difference between medium and larger family homes has expanded, meaning more people are extending their existing property instead of moving. The average cost difference between three and four bedroom houses in all areas of the UK is now in excess of £119k, and as much as £424k in London. Home owners are likely to make fewer moves up the property ladder in the future.
Most people have seen little or no change to their income levels in the last ten years and in nearly all areas the average deposit requirement has risen faster than income levels. According to data from Savills, in London and the South West, deposits have risen twelve times faster than income. Northern Ireland is the only exception, where both deposits and income levels have fallen and deposits have fallen 19 times faster than income.
Lending criteria and, in particular, deposit requirements increased dramatically following the financial crisis. First time buyers struggled to find deposits of over 100% of income in 2007 and, even with current requirements of around 60% income, many first time buyers find home ownership impossible without the help of significant savings or family assistance. Although deposits have fallen back from 2007 levels, they are still much higher than they were previously and are predicted to continue to be high.
More people are now renting rather than buying their home. The change is more significant in those aged up to 44, again reflecting the difficulty of getting on the housing ladder experienced by younger people.
The average price of a house in London has risen by almost 70% in ten years, but in the North West of England and in Northern Ireland the average house price has actually fallen. In fact, house price increases have been largely confined to London and the South East, while the opposite has happened in most other areas of the country leaving some homeowners in negative equity. The income freeze seen in much of the country means people simply cannot afford to borrow more, further constraining house price growth.