In keeping with the similar theme from my previous article regarding York Property prices potentially spiralling out of control, I thought I’d expand on just how unaffordable property prices in York have become.
Without stating the blindingly obvious, the too main ways of buying a property, whether it be to live in or as a buy to let investment, is by cash or mortgage.
Overall 67.03% of properties in York last year were bought with a mortgage, making it a predominant part of the York property market. Something that has become apparent is that not enough homes are being built and as I’ve talked about umpteenth times in other articles, this is one of the main determinants exacerbating the housing crisis we now find ourselves in.
But just how unaffordable are York property prices? Well the standard rule of thumb for affordability when buying a property as an owner/occupier by mortgage, according to the Money Advice Service, is up to four and a half times annual salary. The issue is that property prices in York are rising faster than inflation and by extension, faster than average gross salaries. Back in 2015, according to the Land Registry, the average York property would cost approximately £217,693 and gross annual salaries in York were reported at £26,188. Fast forward four years and property prices have risen by 15.53% to £251,507 yet gross annual wages have only increased by 1.57% to £26,599.
Effectively, this means that York property prices are growing faster than gross wages in York by nearly a factor of 10:1.
So what next for the York property market as property prices continue to outstrip average gross salaries? Well the term ‘Generation Rent’ couldn’t be more apt. However, is this such a bad thing?
We have become a culture where we appreciate instant gratification. I recall when I was at University, when I wanted to order a DVD, I would need access to a PC, before ordering the product and entering my address I’d need to remember my login details, hit ‘forget my password’ to request a reminder/password reset. Nowadays we can stream media on our Smartphones and if we want to order a product, from anywhere in the world (subject to reception) we press a series of buttons and within two minutes, we receive a notification confirming that our item will be delivered within 24 hours.
I assure you dear reader, I am by no means trivialising the Housing Crisis. I am personally fortunate enough to come from that generation where getting on the property ladder was paramount and paying rent to a landlord was the equivalent of burning hard currency.
However, having rented before as well, I truly understand the flexibility that renting has to offer tenants and ability to move into a property that I would perhaps normally not be able to afford or would have to save up to afford.
One other alternative is we will see a significant amount more of individuals buying with Help To Buy although, bearing in mind this is being phased out by 2023, I don’t expect this to be a long-term trend. However could we see a relaxing of mortgage lending criteria for First Time Buyers especially as there are more and more entrants to the mortgage lending market offering better rates to undercut the competition? I would expect that this may not be a favourable conclusion given the events from the credit crunch 10 years ago
One could expect that York property prices can go up only so far as gross wages allow as they will surely be capped by an individuals affordability. However, back in 2015, with the aforementioned affordability criteria, York property would’ve been unaffordable at this time also. In effect, gross wages in York has seemingly not had a direct impact on property prices and with that, it will be interesting to see what is in store in the York property market for the next four years. Let’s revisit this discussion in 2023…