Is Your Home in a Higher Earning Bracket than You?

Is Your Home in a Higher Earning Bracket than You?

Do you rub your hands with glee when checking the climb of property prices in the evening papers? Does the thought that property is one of the best ROIs (Returns on Investment) around put a little spring in your step? And did you know that when compared to your earnings year-on-year over the past two years, your house probably falls into a higher income bracket than you do?

According to Halifax, on average house prices rises have outperformed wage-price rises.

A fifth of all local districts has had such a significant increase in property values that they have outperformed the average increase in salaries and wages. Research by Halifax conducted over a two-year period showed that London boroughs, the South East, and the East were the best performers, with 68 of the 73 highest-earning boroughs being in London.

Hammersmith and Fulham showed house price increases which were close to four times the average take-home pay in the borough. Average take-home pay was £56,698 while house price increases averaged £199,930.

Following London’s lead was the Cotswolds, the South East and the East where average house prices increase by £31,222 more than average income over the two-year period. Stats revealed that Melton and Harborough in Leicestershire had house price performance that topped earnings with price gains exceeding earnings by £9,358 and £6,938 respectively.

House prices seem to be set for a steep rise this season because of the increasing shortage of houses on the market and an influx of first-time buyers looking to get that vital first step on the property ladder. Adding to the count of increasing demand will be a substantial number of pensioners who will get their pension pots to do with as they wish, and speculation is rife that they will look at buy-to-let options.

The lagging performance of income compared to house price rises hits younger first-time buyers with a double whammy because just as they’ve saved enough to secure a decent deposit, up shoots the price of property pushing homeownership just a little further out of reach.

The increase in house price performance in eight local authority districts across the UK outperformed the increase in earnings by more than £80,000. Nationally, house prices rose by 9 per cent during 2014, which was the biggest rise since 2007, according to Halifax. In London, the rise was substantially higher, coming in at 16 per cent, with increases in the South East coming in at 11 per cent.

According to internet property portal Rightmove, asking prices are just £30 below their all-time highs. In March in England and Wales, the average new seller asking price stood at £281,752, which is a one per cent increase from February and £30 below an all-time high recorded in June 2014.

While many factors contribute to the housing shortage, experts believe that pre-election jitters are also partly to blame. There’s also the fact that many sellers are hoping to ride the wave and are waiting for prices to go up even further before putting their properties on the market.

So, one question prospective buyers should be asking is if, by the time the elections have come and gone, sellers will finally succumb to the temptation and put their houses on the market. In the meantime, homeowners can continue to bask in the increasing value of their homes, while being somewhat miffed that their wages are not following suit.

Photo credit: Calculator and monney via Flicker (License)

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