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Residential

House prices rise faster than wages 161214

Q4 2014

UK house price growth outstripped most British workers’ wages over the past year, a Post Office report shows.

UK house price growth outstripped most British workers’ wages over the past year, a Post Office report shows.

Property prices increased by 12% – or £29,339 – while the average worker took home earnings of £27,271, according to the Cost of Buying and Moving Study.

Regional prices

Homeowners in the East, South East and London saw their earnings outclassed the most – with properties in each region earning £34,002, £35,188, and £80,462 respectively.

Houses in the capital earned almost twice as much as the average London salary (£41,095) and more than the average earnings of a fully qualified doctor in the UK (£70,648).

A typical home’s earnings now exceed the starting salaries of a junior hospital doctor (£22,636), a graduate nurse (£21,388), a teacher (£22,023), a police officer (£23,317) and a solider (£17,945).

Overall more than 60% of the working population earned less than the average home in the last 12 months.

More increases

John Willcock, head of mortgages at the Post Office, says property prices have soared over the last year, following a long period of recovery – and are set to increase further over the next five years. 

While this is good news for those who already own their home, the Post Office study highlights the struggle that buyers and movers looking to climb the property ladder face, especially in getting on that all-important first rung.

However, Mr Willcock says that house prices will likely contract slightly over the next year, in response to the Mortgage Market Review (MMR) and falling demand from overseas buyers.

One of the impacts of the MMR is a lengthening in transaction times and more rigorous criteria, meaning the overall process of buying and moving is taking longer.

However, as demand for properties remains high those on the hunt for first homes and dream properties will continue to face substantial costs.

Strutt & Parker & its retained economic advisors Volterra are predicting 9.0% growth for residential house prices across the UK in 2014, followed by 5.0% growth for house prices throughout 2015.

They expect Prime Central London (PCL) house prices to grow 3.0% in 2014, and a further 2.0% in 2015. These forecasts are a stark contrast to 2010 and 2011 when PCL prices surged by over 13% year-on-year.

Stephanie McMahon, Head of Research at Strutt & Parker, said: “Whilst improved economic foundations would certainly suggest that prices will continue to rise over the next few years, the biggest perceived uncertainty surrounding the property markets over the remainder of 2014 and 2015 will continue to be the looming election.”