An increase in public sector salaries in 2019 significantly contributed to making UK housing more affordable, according to property specialists Quinshaw Finance. The alternative property lender has pointed to the government’s announcement last summer which saw nearly a million public sector workers receive pay increases as a key factor in helping to make housing more accessible.
The London-based lender, which primarily focuses on helping property developers to secure funding, responded to data published by the Office for National Statistics (ONS) that suggested that the average UK house buyer would have to spend 7.8 times their annual salary in 2019 – a reduction of 0.2 when compared with the figures from 2018.
Pay increases making housing more affordable
The Quinshaw Finance reviews of ONS data highlighted that 2019’s public sector pay rise – which saw police, teachers, soldiers and hospital doctors all receive higher than inflation pay increases – had a positive impact on the housing market. For context, this decision saw the annual salary of a hospital doctor increase by around £1,500, while a classroom teacher’s pay rose by around £1,000 per year.
Aside from this boost for public sector workers, Greg Davies, Head Analyst at Quinshaw Finance, also noted he believes that the government’s 2019 decision to raise National Minimum Wage from £7.83 to £8.21 per hour for those aged 25 and over significantly helped to make property more financially accessible last year.
A reason to be cautiously optimistic?
Responding to the findings, Mr Davies highlighted the importance of affordable housing, noting that this was the first time since 2015 that the affordability of property in the UK had actually improved when compared to buyers’ average annual salaries. He said: “Given that this happened amid the instability of Brexit negotiations and the general election, it is cause for great confidence in the property market.”
Mr Davies also stressed that it remains to be seen whether this trend will continue in 2020, however. He said: “With the coronavirus pandemic hitting the United Kingdom and the possibility of a no deal Brexit later this year, we hope that the property market is able to remain stable.”
It’s all about location
While Quinshaw Finance emphasised that much of the ONS data was encouraging in terms of housing affordability in the UK, it also revealed significant variation in property affordability on a regional level. The most affordable housing area in the country was identified as Copeland in Cumbria, where homes were valued at an average of £120,000 – 2.67 times the median buyer’s salary. Conversely, eight of the 10 most expensive areas were found to be in London, with Kensington and Chelsea topping the list. Properties in this exclusive area of the capital averaged £1,256,000 – a whopping 38.3 times the average UK annual salary.