Britain's booming million pound property market

Britain's booming million pound property market

If you’ve been watching Sky News this morning, you may have seen my report about million-pound properties. For those who haven’t, here’s a quick recap. There are two main points, with a few of the details:

1. The number (and proportion) of properties being sold for a million pounds has hit a record high.

It’s now running at 10,000 a year, according to Land Registry numbers (compared with just under 9,000 at the peak of the pre crisis peak. The proportion of homes selling for a million or over is actually double what it was back then – 1.4% as opposed to 0.7% in early 2008. In London, the share of properties going for a million or over is now about 7%.

As you can see from this chart, showing running 12 month totals for each region of the UK, the million pound market is dominated by London.*



The second part of the story goes to that London-domination issue.

2. The affordability gap in the UK has widened to the biggest gulf ever. This is according to our calculations comparing the average earnings for residents in a given area (based on the Annual Survey of Hours and Earnings) with the average house price (from the Land Registry).**

The calculations show that although on a national basis (well, England and Wales, since those are the only areas the Land Registry’s numbers cover) the house prices vs earnings ratio remains below its pre-crisis peak, it has risen to unprecedented levels in London. In Kensington & Chelsea, average property prices hit 22 times the average earnings of local residents last year – a doubling in the past decade. They are also at 20 times earnings in Westminster, and 12 times earnings in inner London as a whole.

By contrast, prices in Burnley remain 2.9 times the average earnings in the local area, down sharply from the 4 times earnings peak reached in 2007.

The statistics, which are derived from Land Registry and Office for National Statistics data, illustrate the scale of differences in house price performance throughout the country. Although London boroughs dominate the top of the unaffordability rankings, there are exceptions. Elmbridge in Surrey is Britain’s sixth most unaffordable district, with prices 12.3 times local earnings. Sitting at ninth and tenth in the rankings are Hackney and Brent, where although absolute prices are lower than many other parts of the capital, local earnings are also comparatively lower. The upshot is that for many of those renting in such areas, the prospect of buying a property is becoming ever less likely.

I’ve attached a table showing you the top ten and bottom ten areas in the country for affordability.

Area Average house price Average local earnings Price to earnings ratio
Kensington and Chelsea  £               935,000  £     42,957 21.8
Westminster  £               748,500  £     38,355 19.5
Camden  £               595,000  £     37,372 15.9
Hammersmith and Fulham  £               550,000  £     34,778 15.8
Islington  £               450,100  £     34,876 12.9
Elmbridge  £               444,500  £     36,161 12.3
Wandsworth  £               450,000  £     36,618 12.3
Richmond upon Thames  £               475,000  £     38,860 12.2
Hackney  £               378,500  £     31,023 12.2
Brent  £               340,000  £     27,950 12.2
Bottom Ten
Wigan  £               105,000  £     25,589 4.1
Neath Port Talbot  £                93,750  £     23,462 4.0
Stoke-on-Trent UA  £                88,000  £     22,620 3.9
Merthyr Tydfil  £                86,000  £     22,396 3.8
Rhondda, Cynon, Taff  £                93,000  £     24,872 3.7
Pendle  £                85,000  £     22,932 3.7
Barrow-in-Furness  £                92,500  £     27,794 3.3
Blaenau Gwent  £                70,000  £     21,034 3.3
Copeland  £               115,000  £     35,105 3.3
Burnley  £                71,500  £     24,612 2.9


For those who’d like to look up their area, click here to see a full Google Docs spreadsheet, with each local authority ranked by 2013 affordability ratio.

* It’s worth adding a note of caution here. The Land Registry figures have tended to understate the  total number of million pound properties in the past since they exclude a lot of types of property transactions, including those carried out within a corporate “wrapper”. However, given that new legislation has come in to dissuade people from buying properties through these wrappers, that may have pushed up the Land Reg numbers to some extent.

** Another couple of statistical notes. I’ve used the Land Registry house price figures for mid-2013, as per table 582 on this page and compared them with average weekly earnings (full time) from the ASHE tables you can find here.  I used full-time rather than total earnings because that’s what the DCLG does when working out these numbers. Eagle-eyed readers with long memories may notice that this results in lower house-price earnings numbers than the last time I looked at this issue. The key thing, however, is less the absolute number (which can vary enormously depending on what earnings or housing data one uses) but the pattern. Which is up, up, up.