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Two-fifths of UK workers earned less than the average increase in a UK home’s value in the last year

Press Release   •   Feb 26, 2016 10:58 GMT

  • Two out of five UK workers (38 per cent) earned less than the average UK property gained in value over the last 12 months
  • House prices increased by an average of £18,119 over the last year – 69 per cent of the average wage (£26,426)
  • UK workers only caught up to their house’s ‘earnings’ by 4th September last year
  • However, annual property earnings have fell by £5,800 compared with the previous year – while workers’ earnings increased by £400 per annum
  • London homes earned over £46,000 in the last year – £10k more than the average salary in the capital
  • Two out of five UK workers (38 per cent) earned less than the average home in the last 12 months, according to Post Office Money’s latest Cost of Buying & Moving study.

    The study, compiled by the Centre for Economics and Business Research (Cebr)*, found that average house prices increased by seven per cent – or £18,119 –over the last 12 months**, while the average worker took home earnings of £26,426.

    This means the average house in the UK ‘earned’ 69 per cent of the average worker’s salary over the last year. Workers needed to wait until September 4th last year, before their earnings pull equal with the annual increase of the average UK home.

    A typical home’s earnings now nearly match the starting salaries of a number of the UK’s most-relied upon professions, including that of a graduate nurse (£21,692), a teacher (£22,023), junior hospital doctor (£22,636), a police officer (£23,317), while they outpace that of a solider (£18,125).***

    Commenting on the findings, John Willcock, Head of Mortgages at Post Office, said:

    “Although the rate at which property prices have increased has slowed compared with the dramatic rises seen in 2014 and early 2015, we have still see a big increase in prices over the last year. This has been driven by demand for housing outstripping supply, with the number of properties coming to market failing to match the needs of people looking to buy.

    “While this is good news for those who already own their home and will see their property wealth increase, our study highlights the uphill struggle that buyers and movers looking to climb the property ladder continue to face, especially when attempting to get on that all-important first rung.”

    Homeowners in the East, South East and London saw their home earn the most – with properties in each region earning £27,596, £29,690, and £46,276 respectively. Houses in the nation’s capital earned £46,276 – over £10,000 more than the average London salary (£36,109). Meanwhile, properties in Scotland have bucked the trend and fallen in value by £502. ****

    Conditions remain particularly difficult for first-time buyers, with the average starter property price increasing by 30 per cent over the last five years, from £168,212 to £219,214. Indeed, previous Post Office Money research revealed nearly half of all renters (45 per cent) believe they will never make it onto the first rung of the property ladder. Recent figures from the Association of Residential Letting Agents (ARLA) found that first-time buyers will spend £52,900 on rent before they purchase a property of their own.

    Rate of change

    Despite consistently high earnings for UK property, the rate at which they are earning is falling. The average home earned £5,843 less this year than it did in the previous one, as the market’s initial boom has begun to slow.

    John Willcock added: “While workers’ earnings are increasing overall, two-fifths of all workers are still outpaced by property and, with demand remaining high, those on the hunt for first homes and dream properties will continue to face challenging costs.”

    “Forecasts seem to indicate a year of two halves in 2016, with prices pushed up before April as buyers race to beat the new stamp duty surcharge on second homes but then weakening following its introduction and uncertainty around the UK’s position in Europe. In the medium-term, house prices look likely to continue to rise as demand for property continues to outstrip the supply of new homes”

    Ends

    * Research taken from Post Office’s Cost of Buying & Moving study. Research carried out by Cebr on behalf of Post Office in January/February 2016.

    ** The last twelve months refers to most recent available figures covering December 2014 – December 2015, monthly average

    ***

    ****

    • Average price of a property in the East of England (£314,704)
    • Average price of a property in the South East (£364,904)
    • Average price of a property in London (£536,111)
    • Average price of a property in Scotland (£192,858)

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