Buyers need to earn £20k above average UK salary to afford sold house prices, Go.Compare finds

Prospective buyers need to earn almost £20,000 above the average UK salary to afford a typical home, research by Go.Compare has found.

The comparison website’s analysis of HM Land Registry data and Office for National Statistics (ONS) wage figures showed people would need a pre-tax income of £53,913 to buy an average property. The average yearly UK paypacket currently sits just under £35,000.

The estimate is also based on how much would be required to meet monthly mortgage payments. Go.Compare assumed mortgage servicing would take up a third of a person’s income and that a typical buyer would take out a 90% loan-to-value (LTV) ratio mortgage at a 5.5% interest rate for a 25-year term.

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It all comes as mortgage rates have started to climb again amid market jitters over when the Bank of England will cut its base rate. Since US inflation and the UK Consumer Prices Index (CPI) both came in above expectations, there have even been concerns that interest rates could rise - although economists do not expect this to happen in the UK, at least.

Despite house prices remaining subdued as a result of mortgage market turmoil, industry data has shown affordability continues to be a problem - especially for first-time buyers. The ONS’s latest house price index showed a typical first-rung home costs £234,654 - almost seven-times the average UK salary.

What salary do you need to earn to buy a property?

To work out how much salary you need to earn to buy a property in the UK, Go.Compare has taken January 2024’s HM Land Registry data and the most recent ONS Annual Survey of Hours and Earnings, which was published in November 2023. It also used mortgage assumptions taken from March 2024.

The comparison website, which is owned by the same publisher as MoneyWeek, found flats were the only property category that required a below-average salary. The average needed for this type of home was £30,666 a year. At the other end of the property ladder, the income required for the typical detached property was more than double the UK average paypacket, at £86,633.

Meanwhile, the average terraced house needed buyers to earn £43,456 a year. For semi-detached houses, the figure was £54,895.

Go.Compare said the surge in average property prices, which hit record highs in 2022, had added almost £10,000 to its estimated salary requirement. With the average UK house price jumping by almost £50,000 (22%) to £271,000 over the past five years, the wage needed to buy an average home has gone up from £44,314 to £53,913. It has pointed people to a new tool on its website that shows how much salary you need in different parts of the country.

Nathan Blackler, home insurance expert at Go.Compare, said: “Residents of the UK, and potential buyers in particular, will be well aware of high house prices and property market fluctuations over the past few years. But, our tool allows them to see what that looks like in relation to earnings, putting into perspective the disparity between salaries and homeownership.

“Savers may also find it helpful to get a better understanding of the type of property that might be affordable for them, depending on what they’re currently earning. These figures are based on homeowners' mortgages taking up one-third of their take-home pay, allowing buyers to budget based on their individual needs.”

Blackler added that prospective homeowners should also take other things into account when looking at buying a home, such as routine bills, savings and unexpected costs.

Which locations have most and least affordable house prices?

Go.Compare has also broken its figures down to show the most and least affordable areas, depending on property type. Perhaps unsurprisingly, London comes out on top as the part of the UK that requires the highest salary across each category.

Overall, the comparison website estimates you would have to earn £134,241 to be able to afford the capital’s average property price of £647,698. Five years ago, the average salary you would have needed to get on the London housing ladder would have been £118,738 (11.5% less than today’s figure).

The figure you need in 2024 drops to a slightly more manageable £86,068 for flats and £111,582 to terraced houses, but rockets to £205,894 for a detached property. Here are the 10 UK locations that require the highest salaries to afford the average property:

At the other end of the spectrum, Burnley came in as the place requiring the lowest salary in order to afford the average house price. A buyer in the Lancashire town would need to be earning £23,244 to be able to cover the average cost of £116,824 - 26% up from the £18,510 that would have been required in 2019.

This figure drops to just £13,127 for anyone seeking out a flat, with a terraced home coming in at just over £17,000. The salary needed for a semi-detached house in the town was £24,564, while the amount needed was £38,279. Here are the 10 UK locations that require the lowest salaries to afford the average property: