There has been a contraction in the divide between earnings and property price inflation in recent years, according to new research by Halifax.
The report said that historically, homeowners in many locations found themselves ‘earning’ more from the annual increase in the value of their property than from their take-home pay. That trend is now shifting as a result of weaker house price inflation and stronger wage growth.
The average rise in house prices over the last two years has outstripped post-tax earnings in 8% of local authority districts (LADs). This compares to 18% in 2017 and 31% in 2016.
London borough Richmond-upon-Thames is one of those few, producing the biggest gap between property inflation and wages at £55,482, or the equivalent of £2,312 a month. This equates to more than 80% of the average deposit on UK house purchases, but still far short of the London average of £137,638.
The next biggest gap was found in Winchester in the South East of England (£45,016). Wandsworth was the only other London borough to make the top 10, in stark contrast to a year ago, when nine of the top 10 LADs were in the capital.
Russell Galley, managing director of Halifax, said: “While the slowdown in house price growth may not be welcomed by homeowners, the narrowing gap between prices and wages should improve mortgage affordability for all, meaning that larger house, home extension or even first property are all more attainable.
“Although every region of the UK saw earnings exceed price growth overall, there continue to be significant variations across the country. The majority of areas where house price inflation outpaced owners’ take-home pay are still to be found in London and the South East.”