The most expensive – and cheapest – places in UK to buy a home as prices continue to rise

Martin Roberts discusses the rise in house prices

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According to data from the Capital Economics think tank, mortgage repayments are set to surge above rents for the first time in 14 years as interest rates soar. Data from the Office for National Statistics (ONS) shows house prices increasing at a rate that means would-be homeowners in parts of the country may need to borrow up to 71 times the average income to be able to afford a house.

The ONS figures show that in the year to September 2021, the average house in England and Wales cost around 8.9 times the average income – up from 5.1 times in the year to September 2002.

The figures look at the income of every household member, plus any income from benefits, before things like tax, national insurance and pension payments are taken into account.

Analysing these figures at a neighbourhood level (areas of about 7,200 people), using net household incomes that take these payments into account, shows just how stark the reality of getting on the property ladder can be at a local level.

You can check the figures for your neighbourhood using our postcode search below.

In one affluent London neighbourhood – the Knightsbridge, Belgravia and Hyde Park area – the average family would need to borrow 70.8 times the local average yearly income to afford a home, making it the least affordable area in the country.

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The average net household income in the neighbourhood is an estimated £35,312 a year, while the average house sold for a whopping £2.5million in the year to September 2020.

Outside of London, the most expensive neighbourhood is in the Oxshott and Stoke D’Abernon area of Elmbridge, Surrey, where homes typically sell for £1.2million – 25 times the average income for the region.

Meanwhile, on the other end of the spectrum, a house in one neighbourhood in the Ayresome area of Middlesbrough – the most affordable in the country – could be bought for just 1.7 times the average household income.

There, the average net household income is an estimated £26,647 a year, and the median house price is just £45,000.

In total, based on the level of maximum borrowing allowed by the Bank of England, only 12 percent of neighbourhoods across England and Wales are actually affordable to those living there, figures show.

Before the end of 2022, mortgage repayments will far outweigh the cost of rent, making homeownership even less likely for people trying to make the break for the property ladder.

According to data collected by Capital Economics, the average monthly mortgage costs were £817 at the end of 2021, lower than rents at £931 per month.

However, the think tank’s economists now estimate that at the start of next year, average mortgage repayments will be just above £1,000 compared to around £980 for rents.

Andrew Wishart, a property economist at Capital Economics, said: “When the monthly cost of buying has eclipsed that of renting in the past it has signalled trouble ahead, with prospective first-time buyers choosing to rent rather than buy, helping to cool demand.”

Mortgage rates across the UK are on the rise due to a string of Bank of England interest rate hikes, implemented to curb the highest inflation in 30 years.

This action will cause the average rate of new mortgages to double from 1.5 percent in November 2021 to almost three percent in 2023, Capital Economics data shows.

However, last week, figures released by the Nationwide building society showed house prices grew at the fastest annual pace for more than 17 years in March 2022.

Annual growth in house prices hit 14.3 percent in February, the mortgage lender said, the strongest pace since November 2004.

The cost of a typical UK home reached a new record high of £265,312, rising £33,000 in the past year, it said.

Increased mortgage rates and the cost of living crisis hadn’t dampened acceleration in house prices, the figures showed, with Nationwide saying prices were being pushed up by robust demand, limited supply and a strong jobs market.

Despite these factors, Nationwide expects house price growth to slow in the year ahead, due to high inflation rates and interest rate rises.

The Office for Budget Responsibility (OBR), an independent body that makes economic forecasts for the Government, predicted in October last year that house prices would fall in 2022.

It said last week that people in the UK were facing the biggest drop in living standards on record as wages fail to keep pace with rising prices, and house prices are expected to follow suit.

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