Is UK housing more affordable?

Last month, the Office for National Statistics reported that UK housing is now more affordable than at any time in the last ten years. In a world where everything seems to be getting more expensive, that seems like astonishingly good news.

The ONS calculates that the ratio of the median house price in England and Wales to median earnings was 7.6 last year. That is the fourth consecutive year in which the ratio of prices to earnings has fallen and the lowest reading since 2015. The peak for the index was 2021, in the pandemic house price boom, since when house prices have risen by 5% and average earnings have risen by 25%.

Time to rejoice? Sadly, for most people housing is becoming more expensive, not less.

For a start, the ONS measure of affordability excludes mortgage costs. The era of low interest rates and cheap mortgages, which prevailed from the financial crisis to the pandemic – and helped keep housing affordable in the face of rising house prices – is over. Two and five-year mortgage rates are around 5.0% today, up from 2.0% or less five years ago. Looking at average mortgage repayments as a percentage of income, housing is more expensive today than at any time in the last 18 years.

A further problem relates to obtaining a mortgage, something that has become harder as a result of restrictions on lending put in place after the financial crisis. Research by the Resolution Foundation finds that the main constraint for first-time buyers seeking a mortgage relates not to their income but to the need to provide a 5% deposit. Those who are lucky and can get help for a deposit from family or friends do. Most would-be buyers have to wait and save for the deposit. Unsurprisingly, more young people live with their parents, and for longer, while home ownership rates for the under-35s have halved in the last 30 years.

Still, it’s surely good news that earnings growth is outstripping house price inflation. Well, yes, though once you dig into what’s happening at a regional level things are less rosy.

The ONS measure of affordability has improved in part because of weakness in property prices in a small number of areas of London. Kensington and Chelsea has seen the biggest losses, with prices down 21% in the last three years. In the City prices have fallen by 10%, in Hammersmith and Fulham, by 9%. By and large flats in London have fared worse than houses. London flats face significant headwinds: older first-time buyers wanting gardens, rising costs and bureaucratic burdens for buy-to-let landlords, high levels of stamp duty on second homes and soaring service charges.

Housing affordability, as measured by the ONS, has improved the most in the most expensive parts of the country. But in these places, mainly in London, housing still remains eye-wateringly expensive. In Kensington and Chelsea, for instance, the ratio of property prices has dropped from 40 to 25, three times the average for England and Wales. Moreover, a cheaper pied-à-terre in the City or Georgian townhouse in Chelsea doesn’t help anyone other than the buyers of those properties.

Outside London, and especially in areas with much lower prices, property prices have kept on rising in recent years. That means that housing affordability has improved far less in these areas than in places like Kensington and Chelsea. Worse still, on any objective measure, housing in such areas outside London and the Southeast remains expensive for locals.

The ONS, in common with the statistics agencies of a number of other countries, deems property affordable if it costs less than 5x average earnings. In 2025 only 7% of local authorities across England and Wales – 23 out of 318 – met this criteria. This has fallen from 9% in 2015 and 11% in 2005. In other words, even on a narrow measure, one that excludes mortgage costs, housing affordability has deteriorated in the last ten years.

The fundamental problem the UK faces in relation to housing is one of demand and supply. The population of the UK has risen by about nine million in the last 20 years, largely as a result of immigration. Housing supply has not kept up. Measures that try to help homeowners, but do not increase housing supply – such as stamp duty holidays or making it easier to obtain a mortgage – tend to raise house prices.