Property more affordable than in 1997

Talk of an affordability crisis appears overblown as homes are now more affordable than in 1997, new research suggests.

A combination of falling inflation, low interest rates and rising wages means that homes in most areas of England and Wales are now more affordable than 18 years ago.

The Ability to Buy index from estate agency Hamptons International showed affordability increasing from 133.2 points in 1997 to 135.5 points in the first three months of this year.

This suggests that more people are finding it easier to purchase their first home or move up the ladder, and have more money left over after their mortgage repayments.

The situation also improved since the final quarter of 2014.

Affordability has continued to improve in the North East, North West, Yorkshire & Humber, East Midlands, West Midlands and Wales from 1997 to 2015.

But it has deteriorated in London, the East, the South East and the South West.

Johnny Morris, head of residential research at Hamptons International, said the ability to buy is improving across England and Wales.

“In the first quarter of 2015 most households had more money left over after paying essentials to put towards buying a home.

“That said the ability to buy differs significantly across the country. In London and the South East house price growth has outstripped wages and the lower costs of living, making it more difficult to buy.

“In contrast the regions of the Northern Powerhouse have seen the ability get better and better.”

In the first quarter of this year, a first-time buyer in London had £85 less left over after mortgage payments compared to the first three months of 2014.

Morris said: “As the London economy continues to strengthen more workers are being pulled in from across the country and from overseas. This putting upward pressure on house prices.”

Across the rest of the country, first-time buyers saw an increase in cash after servicing their home loan.

The London market started to slow last autumn but the supply-demand imbalance is still propping up values.