Nationwide pinpoints local areas with most affordable housing for first time buyers

Posted on Monday, March 1, 2021

There has been a significant widening of the gap between the areas of the UK with the least and most affordable housing according to the latest report from Nationwide Building Society.

Its recent affordability report shows there is considerable variation within each region of the UK. This report aims to show both the least and most affordable areas within each region, using a house price and earnings data from Land Registry and the Office of National Statistics.

Nationwide says this was one of the comprehensive views on housing affordability at a local level.

Not surprisingly, London has the least affordable housing and within this region Kensington and Chelsea is the least affordable area, with a first-time buyer house price to earnings ratio of 16.8. This is almost twice that of the most expensive area in the East of England – Hertsmere – which has a house price earnings ratio (HPER) of 9.6.

In the South East, Oxford is the least affordable area (with a HPER of 9.2). In contrast in the North East, North Tyneside is the least affordable area with a HPER of 4.1

Nationwide also identifies the most affordable places to buy property, identifying the local authority areas with the lowest first time buyer house price earnings ratio within each region.

The cheapest is East Ayrshire in Scotland with a HPER of 2.3 This is followed by Copeland in the North West (HPER of 2.5) and County Durham in the North East (HPER of 2.7)

This contrasts with London and the South East. In the capital the area with the most affordable housing is Bromley with an HPER of 6.7, while in the South East, it is   Dover with a HPER of 5.5 In the East of England  Great Yarmouth is the most affordable area to buy property with a HPER of 4.5.

Nationwide also looked at how affordability has changed over the past five years, by comparing these ratios between 2015 and 2020. Surprisingly, the London borough of Hammersmith & Fulham had seen the biggest improvement, with the HPER falling from 15.6 to 11.5, a change of -4.1 percentage points. No other local areas had seen such an improvement, with the next biggest change occurring in Aberdeen City, in Scotland, which has seen the HPER fall from 4.7 to 3.2 over this period, a change of just -1.5 percentage points.

Nationwide senior economist Andrew Harvey says: “Affordability gains in other regions have been more modest. Overall 25 per cent of local authorities in Great Britain have seen an improvement in affordability compared with 2015, while FTB house price earnings ratios have risen in 73 per cent of authorities, with the balance unchanged.”

He adds that there has been a noticeable increase over this period in the proportion of local authorities with higher HPERs. “Around 40 per cent of authorities now have a HPER of 6 or more, compared with 28 per cent in 2015. Similarly, only 30 per cent of localities now have a HPER below 4.5, down from 40% five years ago.

“This helps to illustrate the challenge that many first-time buyers across the country face, in terms of raising a deposit to purchase their first home. However, the low level of interest rates means that the cost of servicing a mortgage as a share of take-home pay is actually below the long run average in most parts of the country.”

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