Forty-five per cent (1,091) of the postcode districts included in the research are “rental traps” – areas in which a family cannot afford to buy a mid-price property.
In a further 13% of the areas it is not only unaffordable to buy but also to rent because the cost eats into a disproportionate amount of the household’s income, based on widely accepted affordability criteria.
The data, sourced from the marketing services company TwentyCi, gives a detailed picture of the asking prices in 2,400 British postcode districts in the year to 30 September 2023. The number is roughly 86% of all postcode districts in Great Britain.
Property prices are outstripping the loan-to-income ratio required by most banks, which is typically 4.5 times a couple’s joint salary. The ratio has eased a little over the past year across the UK as the cost of living crisis affects the market, yet still remains close to historical highs.
After years of prices accelerating at a faster pace than wages, the affordability gap – the difference between people’s annual workplace-based earnings and the cost of the properties available to buy – has risen significantly. Figures from the Office for National Statistics showed that, while earnings in England and Wales have doubled since 1997, house prices have increased at a much faster pace, multiplying by 4.5 times over the same period.
In the year to September 1997 a mid-range house in England cost 3.5 times the median full-time salary – ie the one at the midpoint when all incomes are put in ascending order of size. By 2022 that ratio had grown to 8.3 times a person’s median earnings.
While the Guardian’s analysis assumes a prospective buyer has a 10% deposit, saving for one is often a huge barrier for first-time buyers because of rents eating up an increasing proportion of people’s wages, and because of inflationary pressures on food and energy prices.
Rising rents and property prices have meant more people are forced to rent for longer, with the average age of a first-time buyer increasing over time: it stood at 34 in England in 2021-22. Given many people have started a family before this age, first-time buyers are often seeking two- or three-bedroom properties.
The data casts light on just how inaccessible the housing market can be in certain parts of the country, especially London. A couple earning the median local wage are stretched beyond their means if they wish to rent or buy in 72% of the capital’s postal districts. A further 27% of areas are affordable for the same couple to rent – but they will use up at least 20% of their combined wages in doing so.
This leaves just 1% of districts – in pockets of Bexley, Bromley and Greenwich – where a couple can afford to either rent or buy a mid-range property.
The problem is not confined to London. Most districts in the east, south-east and south-west of England are deemed unaffordable for local couples to buy or rent. In Bristol the figure is close to a quarter, while in some larger towns such as Oxford all are out of reach.
By contrast, 91% of Scottish postcode districts for which data was available were affordable for typical local couples to either rent or buy based on asking prices, closely followed by the north-east of England at 90%.
The analysis is based on the median value of all properties on the market to rent or buy in the 12 months to 30 September 2023. While this data provides the most accurate and up-to-date picture of asking prices in the housing market, an area’s median price can be affected by the size of the properties on the market during this period.
The analysis excludes areas that have either a very low number of properties for rent or sale, which has led to the exclusion of some postal districts – marked in white on the interactive – especially in rural and remote areas.
Colin Bradshaw, the chief executive of TwentyCi, said the low supply of affordable new builds for first-time buyers was exacerbating the issue: “For those trying to make the leap from the rental sector to owner occupied, the persistence of high inflation leading to higher interest rates and consequently more costly mortgages amplifies the gap.”
A government spokesperson said: “Since 2010, more than 860,000 first-time buyers have been helped into home ownership through government backed schemes, and our long-term plan for housing will help even more people to become homeowners.
“Building more affordable homes is key and we have already delivered 659,000 homes through our £11.5bn affordable homes programme since 2010.
“We are also delivering a fairer private rented sector through the renters (reform) bill by abolishing section 21 ‘no fault’ evictions, so all tenants can have greater security in their homes and are empowered to challenge poor practice without fears of revenge evictions.”
The rental and property purchase prices are sourced, deduplicated and verified by TwentyCi. The map file is sourced from Edinburgh Datashare.
Sales are defined as the asking prices for properties listed as for sale, sold or subject to contract between 1 October 2022 and 30 September 2023. Rentals are defined as the asking prices for rents in the same period, including those where a let has been agreed.
Filters have been applied to exclude mobile homes, auction properties, shared-ownership properties, land or site sales, retirement homes and properties used for short-let purposes, wherever possible. Data for Northern Ireland was not available.
The analysis is based on the median property cost per postcode district, excluding postal areas where there were fewer than 20 properties for either sale or rent in the period covered by the analysis.
Proportions (eg 45% of postal districts) are based on the total number of districts that meet this criteria: 2,400 postal districts in total.
Earnings are defined as the median gross annual pay of its surrounding local authority in 2022, as sourced from the ONS. Where a postcode district falls into more than one local authority, the salary amounts are drawn from the local authority with the highest number of postcodes within that district. In a small number of cases, a local authority’s pay data was unavailable. In these cases median property prices were compared to the regional median income.
The analysis is based on a household that has two working adults that each earn this median gross annual pay of the surrounding local authority.
Affordability is defined as follows:
Sales: a property is considered affordable if the mortgage (defined as 90% of the median property price) does not exceed 4.5 times a couple’s combined salary (as described above). The analysis assumes the prospective buyers are able to raise a deposit (10% of the mortgage price).
Rents: rentals are considered affordable if it makes up no more than 30% of a couple’s median gross monthly pay (as described above).
Consideration was given to standardising the data analysis based on a set number of bedrooms. After consultation with experts the decision was taken to base the analysis on the median of all properties in an area compared with the combined income of the median household, in keeping with typical property metrics. As a result, an area’s median value for rent or buying could be impacted by the mix of housing stock on the market at the time of analysis.
For example, the BD1 district had a majority of one-bedroom properties in the analysis, which may be as a result of a number of one-beds coming on the market in the time period covered and not because that was the prevalent property type in that area.
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