The booming property market has led to houses earning more than people in some areas of the country during the past year, research has shown.
There are 33 areas of England and Wales in which the typical cost of a home increased by more in 12 months than local people were paid, according to the MailOnline.
House prices increased by 7 per cent in England and Wales during the year to the end of April – adding £10,809 to the average property’s value, according to the Land Registry.
Average earnings in 2013 were more than double this increase at £22,045.
But in London, where house prices boomed by 17 per cent, property gains significantly outstripped earnings in several boroughs.
Westminster in central London saw the biggest gain, with the typical property adding £160,810 to its value to stand at £976,822.
Average earnings for people living in the borough were less than a quarter of this amount at just £34,092 a year.
Homeowners in Westminster were not the only ones to enjoy six-digit price increases, with the cost of a home in Hackney rising by £125,788 in the year to the end of April, while local earnings were just £27,895.
The cost of a home in Hammersmith also rose by £126,587, significantly outstripping local average pay of £33,082.
Overall, property prices in 27 London boroughs rose by more than average earnings during the past year.
Outside of London, properties in Windsor and Maidenhead enjoyed gains of £42,411 in 12 months, while salaries in the region averaged £29,501.
The area was followed by Brighton and Hove, where homes earned an average of £28,702, but people earned only £22,740.
In the Vale of Glamorgan house prices rose by £23,124, outstripping annual wages in the area
In Birmingham, properties in Sandwell saw their values rise by £21,945 in a year, while average incomes stood at £18,934.
House price growth also outstripped average earnings in two areas of Wales, with Powys recording price rises of £25,621 in a year, while local pay was £17,725.
In the Vale of Glamorgan house prices rose by £23,124, outstripping annual wages in the area by £1,300.
Hertfordshire took the last place on the list, with average house price growth of £26,538 coming in just ahead of average earnings of £25,993.
But while the figures may be good news for homeowners, they are bad news for people trying to get on to the property ladder, as the gap between house prices and earnings continues to widen.
The research comes just days after Chancellor George Osborne announced plans for the Bank of England to be given new powers to cap the loan-to-income ratios advanced by banks and building societies.
Although Osborne stopped short of saying what the limits should be, Business Secretary Vince Cable called for lending to be capped at 3.5 times a borrower’s salary.
The strong price growth means someone with a 25 per cent deposit would need to earn £54,000 to buy an average priced property if lending was capped at 3.5 times a borrower’s salary.
Lending to homeowners risks being ‘snuffed out’ by concern about house prices rises, predominantly in London, it was suggested today.
Borrowers with good credit histories could find themselves unable to get a mortgage if loan-to-value caps are introduced, warned Simon Crone, Genworth’s vice president of mortgage insurance Europe.
The comments follow Chancellor George Osborne announcing new powers for the Bank of England to limit mortgage lending to help curb Britain’s booming property market.
In his annual Mansion House speech, Osborne said the Bank of England would be able to limit loans-to-value as well as loan-to-income ratios advanced by banks and building societies.
“There are some signs that underwriting standards are becoming more lax”
But Crone said such blanket measures run the risk of excluding credit worthy borrowers.
“LTV caps on their own, without any degree of flexibility, are blunt tools which risk excluding credit worthy borrowers,” he said.
“If the Bank of England is given the power to introduce them in future, then before putting this theory into practice, the Chancellor and the Bank should consider the effectiveness of combining LTV caps with the flexibility to exceed the cap for credit worthy borrowers.
“It’s critical to ensure responsible mortgage lending isn’t snuffed out by concern over rising house prices predominantly in and around London, which is its own unique market and bares little relation to the rest of the country.”
Osborne has stopped short of saying what the limits should be – although Business Secretary Vince Cable has commented that lending should be capped at 3.5 times a borrower’s salary.
House prices are currently rising by double digits according to some indexes, raising concerns that a bubble could be building up in the market.
It is unclear how much impact a cap on income multiples would have on the property market.
Tough new affordability criteria have already been introduced at the end of April under the Mortgage Market Review.
The typical home mover borrowed three times their income during April, while first time buyers borrowed an average of 3.42 times their pay, according to the Council of Mortgage Lenders.
But the governor of the Bank of England Mark Carney said: “There are some signs that underwriting standards are becoming more lax, with the proportion of new mortgages at high loan-to-income ratios now at an all-time high.”
With the World Cup having kicked off, we have football on the brain. For this week’s top 10 we’ve taken a look at what properties are on offer for all you football fanatics out there.
1. Sheering Hall comes equipped with it’s own football pitch – ideal.
Eight bed in Essex, £5.8m – Hamptons
2. This Grade I listed Jacobean mansion has its own sports pitches and a grand total of 329 bedrooms. Perfect for a football tournament for all your family and friends!
Ten bed in Hampshire, POA – Knight Frank
3. You could play a game whenever you like if you owned Wanstead Sports Club.
Commercial Property, POA – Victorstone
4. A striking country house set amidst magnificent gardens & parkland with ample space for a full size football pitch.
Seven bed in Cheshire, POA – Sotheby’s
5. Maybe you’re more of a table football fanatic. What a set up for watching the games!
Six bed in Surrey, £8.2m – Sotheby’s
6. Another opportunity to make football your business with this sports complex and ancillary accommodation.
Sports Complex in Wolverhampton, £795,000 – Skitts
7. Get the team over to yours for 5 a side football in the back garden.
Seven bed in Northampton, £1.35m – Fine & Country
8. A Californian dream – this 22 acre compound has everything you could ever want including your own football field.
Six bed in California, USA £4.5m – Coldwell Banker
9. Why not diversify with a multi sport option, then you’re sorted for Wimbledon as well.
Five bed in Surrey, £2.2m – Fine & Country
10. This stunning family home has previously catered for up to 60 family friends to host football, swimming and tennis tournaments. What a way to spend a summer’s day.
Four bed in Bracknell, £3.9m – Chewton Rose
Interest rates may rise this year and action could be taken to cool Britain’s overheated housing market, the Governor of the Bank of England Mark Carney has suggested.
Speaking late last night, he said a rise in rates ‘could happen sooner than markets currently expect’, with ‘gradual and limited’ increases being needed as the economy recovers.
The Bank Rate has been at a historical low of 0.5 per cent for more than five years and the financial markets had not anticipated a rise until next year. But the economy seems to be recovering faster than expected.
Carney also said the housing market is ‘showing the potential to overheat’ and he expressed concern about borrowers over-stretching themselves financially.
It comes as new research showed house prices rose by nearly £21,000 during the past year.
The average property value increased by 8.5 per cent in the 12 months to the end of May to stand at £266,013, according to LSL Property Services.
The group said the rise was the fastest annual increase it had recorded since August 2010, when the housing market was recovering from the financial crisis.
House prices have risen in 91 per cent of unitary authorities across England and Wales during the past 12 months.
David Newnes, director of Reeds Rains and Your Move estate agents, owned by LSL Property Services, said: “As the vigorous health of the UK housing market catches international and media attention, all eyes have been on how the Government and regulators will react.
“However, the growing clamour for intervention neglects the fact that when taking inflation into account, only London and the South East have seen house price growth in ‘real’ terms since January 2005.”
He added that while in London house prices had soared by 13.3 per cent during the past year, excluding the capital, property values had increased by just 6.3 per cent across the rest of England and Wales.
The difference between the price of a home in London and the rest of the country is now the biggest since the group’s records began.
But LSL said there were indications that the property market was beginning to cool, particularly at the top end of the London market.
“the introduction of tough new lending criteria under the Mortgage Market Review had led to an easing in buyer demand”
Prices actually fell in 12 London boroughs during April – the latest month for which figures are available.
The prime central London boroughs of Kensington and Chelsea and the City of London suffered the biggest drops, with property values falling by 2.7 per cent and 2.9 per cent respectively.
Across England and Wales as a whole, there was also a slow down in the annual rate of sales growth.
The group estimates that 72,000 homes changed hands during May – just 8 per cent more than in the same month of 2013.
The figure is well down on the year-on-year rise of 33 per cent seen during the previous 10 months.
Today’s data comes the day after the Royal Institution for Chartered Surveyors also reported a cooling in the housing market during May.
The group said a combination of limited supply and the introduction of tough new lending criteria under the Mortgage Market Review had led to an easing in buyer demand.
Meanwhile, chartered surveyor e.serv said mortgage approvals for house purchase in May had fallen to their lowest level for a year.
Suggestions that the housing demand is cooling should help to ease concerns that a bubble may be building up in the market.
Mortgage lending fell to its lowest level for a year during May in a further sign that the housing market may be cooling, research has shown.
A total of 61,202 loans were approved for house purchase during the month, the fourth consecutive monthly decline and the lowest level since June 2013, according to chartered surveyore.surv.
The group said approval levels were now 19 per cent lower than at the beginning of the year, as demand from potential buyers eased.
“Uncertainty is one factor affecting home movers. Some buyers are waiting to see if the market will begin to plateau before agreeing to pay the high price tag on new property.”
The research comes as the Royal Institution for Chartered Surveyors also reported a cooling in the housing market during May.
The group said the number of homes being put up for sale fell for the fifth month in a row, but demand from potential buyers also eased, taking some of the pressure off prices.
It said the shortage of homes on the market, combined with the introduction of tough new lending rules under the Mortgage Market Review appeared to be “stemming the tide” of perspective buyers.
But despite the overall decline in mortgage approvals, e.surv said pipeline loans to first-time buyers continued to pick up in May with 9,670 mortgages agreed for people with a deposit of 15 per cent or less, 40 per cent more than in the same month of last year.
Data released by the Council of Mortgage Lenders today also showed a 52 per cent year-on-year increase in lending to first-time buyers in April.
A total of 24,500 loans worth £3.5bn were advanced to people buying their first home during the month.
But the group said first-time buyer affordability worsened in April, with average income multiples rising slightly to 3.42, up from 3.41 in March.
At the same time, the average amount borrowed rose to £121,500, the highest level ever recorded and up from £118,750 in March.
At the same time, typical first-time buyer incomes also rose to a new record of £37,000.
The group also reported that the value of mortgages advanced to people moving home rose to £8.8bn in April, 11 per cent more than in March and 47 per cent higher than a year ago.
Paul Smee, director general of the CML, said: “First time buyers and home movers continue to be key drivers in the growth of the market and, despite fears that MMR preparations may hinder this momentum, we have seen a continued year-on-year upward trend every month in 2014.
“The UK picture continues to mask a disparate set of varied local conditions, but overall we expect lending levels to continue to build on the foundation of growth we have seen over the past 12 months.”