An increase in the minimum wage in 2019 helped to make properties in the UK more affordable, it has been suggested. According to alternative property lender Quinshaw Finance, the rise was one of the factors that made housing more accessible to buyers last year compared with 2018.
The company, which specialises in helping developers to secure funding, responded to a report from the Office for National Statistics (ONS) that revealed property prices in the UK were on average 7.8 times the annual salary of buyers in 2019. This was a drop of 0.2 on the previous 12-month period.
Average salaries increased from £29,667 to £30,500 between 2018 and 2019, while house prices rose by £750. Earnings grew faster than property values in more than half of all local authority districts across the country.
Government decisions made property more accessible
Head analyst at Quinshaw Finance Greg Davies said he believes that the government’s decision to raise the minimum wage for those aged 25 and over from £7.83 to £8.21 per hour last April helped to make property more accessible. The move to up the pay of public sector workers also had a positive impact on the housing market, he suggested.
Last summer, the government announced that nearly a million of these workers, including police, hospital doctors and teachers, would receive higher than inflation increases in their pay. For example, classroom teacher pay rose by 2.75 per cent.
Important for homes to continue to be affordable
Mr Davies said Quinshaw Finance is “pleased” that homes have become more affordable, noting that this is the first time these figures have improved in five years. He added that because this happened during a period of instability caused by Brexit and a general election, it is a “great cause of confidence in the property market”.
However, he went on to express caution, emphasising the importance of homes continuing to be affordable. He added: “With the coronavirus pandemic hitting the [UK] and the possibility of a no deal Brexit later this year, we hope that the property market is able to remain stable.”
Major differences across the UK
The Quinshaw Finance reviews of ONS data also drew attention to the significant regional differences in property affordability. Unsurprisingly, a number of areas within London were identified as the least affordable. Kensington and Chelsea topped the list, with homes there averaging £1,256,000 (38.3 times the average annual salary). At the other end of the scale, Copeland in Cumbria was found to be the most affordable location, with homes there averaging £120,000 (2.67 times the median salary).